Investment Approach

• Employs a systematic, data-driven process to identify attractive stocks within the U.S. small- and mid-cap universes. Stocks are ranked based on fundamental metrics primarily drawn from the firm’s financial statements. Our stock selection approach reflects the following key investment convictions:
  • We favor stocks that appear inexpensively valued relative to their respective industries and equity universes.
  • We prefer companies that generate substantial free cash flow. Such companies have the potential to be self-financing and can continue to invest in periods when borrowing capital is not easy.
  • We favor companies that have a high return on capital and use cash flows wisely in a manner that benefits shareholders; for example, by executing projects with an expected high return or via the reduction of share count through stock buybacks.
  • We seek companies with high quality characteristics, including our evaluation of earnings quality, which identifies the stability of historic earnings and the expected volatility of future earnings.
  • A smaller emphasis is placed on price momentum and earnings estimate revisions. A lesser emphasis on momentum typically results in longer investment horizons and reduced portfolio turnover.
• While stock selection is based on a quantitative model, we do take into consideration fundamental research and other information that might not be fully captured in our models.
• Relying on quantitative models entails the risk that the models themselves may be limited or incorrect, that the data that the models rely on may be incorrect or incomplete, and that the adviser may not be successful in selecting companies for investment or determining the weighting of particular stocks