The hallmark of our "Growth-With-Value" investment style is intense in-house research focusing on under-owned/inefficiently-valued “good growth businesses“ that we believe are generating major gains in their enterprise values, but whose stocks have not been fully institutionally exploited. Depending on the market cap focus of the particular portfolio, we purchase stocks of “real companies” with revenues ranging from $100 million at the low end of Small Cap to $20 billion at the upper end of Mid Cap, capable of growing a minimum of 15% to much higher rates and inefficiently priced by the market for the earning power that is developing.
In practice ours is a true investment approach with low turnover, in contrast to the high turnover (+/-100%) fast-card-shuffle momentum style of many “aggressive growth” managers. Kalmar in fact seeks longer term ownership of productive growing businesses agile enough to capitalize on special niches in the economy or to benefit from new products or changed business strategies, yet whose stocks can be bought undervalued and, hence, with both high reward potential and low risk. Our objective is fewer, better decisions resulting in longer holding periods and larger gains, based on in-depth original research. We seek high reward/low risk character in our individual holdings as well as in our overall portfolio strategy and diversification.
In addition to lower turnover, there is normally limited idea overlap between Kalmar portfolios and the “aggressive growth” momentum style cited above, that is until Kalmar holdings graduate into the higher recognition arena by virtue of company success and/or expanding Wall Street sponsorship. Because of historically good stock selection, this has happened regularly to our clients’ benefit. At that point we often “peel the onion” to further control risk and recycle assets opportunistically into other more inefficiently valued good growth businesses.
A preponderant portion of the investments are in small, smid and mid cap stocks. Investments in small, smid and mid cap stocks involve greater risks than investments in larger, more established companies, are more volatile, and may suffer significant losses. Further, the market for small, smid and mid cap stocks are generally less liquid than the markets for larger stocks, which can contribute to increased price volatility of small, smid and mid cap stocks. Past performance is not necessarily an indication of future results.
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