STRATEGY


  • FIND UNDERVALUED STOCKS WITH STRONG BALANCE SHEETS.
  • PROFIT FROM MARKET INEFFICIENCIES UNIQUE TO THE SMALL CAP SECTOR.
  • USE BOTH FUNDAMENTAL AND TECHNICAL ANALYSIS.


     Our strategy brings you financially strong undervalued small cap stocks. By finding stocks that have lower than average price-to-book and price-to-sales ratios we lower our overall risk. We don't just look for any undervalued stocks. Some stocks are always undervalued.  We look for stocks that are likely to be only temporarily undervalued based on the fundamental aspects as well as on a stock's previous trading pattern.
 
      We only select stocks that have strong balance sheets. Our typical recommendation trades between 1 and 2 times tangible book value. Tangible book value acts like a floor for a stock, especially when it comes to technology stocks because most of the tangible book value tends to be comprised of current assets (primarily cash).  A cash rich company has many options open to it.  A company can spend money to improve products, acquire and/or develop new products,  or buy back shares as a way of increasing shareholder value.  When you stick to only financially strong companies you lower your risk and increase your chance of really outperforming the market.

     Understanding and mastering the relationship between risk and reward is the key to successful investing.  There must be a very favorable combination of low risk and high profit potential.  Most people fail at this because they consistently underestimate the risk and overestimate the potential of the stocks they buy.
  
     Earnings releases and quarterly reports are examined.  Earnings conference calls are listened to. We strive to find stocks where the fundamental outlook is about to improve.
    
     In addition the technical aspects are looked at for potential bottoming or breakout chart patterns.  We don't recommend a stock just because there was a technical breakout or other technical pattern that we liked. The stock must also be undervalued and have the fundamentals to support higher prices.