Small Cap Growth Strategy
Investment Team
Lanny Thorndike is Lead Portfolio Manager and Kevin Callahan is Co-Portfolio Manager for the Small Cap Growth separate account strategy. Lanny and Kevin are supported by a 4 equity analysts, and 2 equity traders.
Investment Philosophy
The Small Cap Growth team’s investment philosophy operates on the thesis that capital markets, especially in the small cap segment, are inefficiently priced and that original, fundamental research can identify companies that will grow faster than their peers and the overall market. Century has made a significant commitment to in-house research as Wall Street firms continue to reduce their research coverage of smaller companies. At a time when sell-side research firms continue to scale back research coverage in the small cap segment, Century’s Small Cap Growth investment team has a collective target of 400+ annual on-site company visits. We believe this feet-on-the-ground research approach gives us a competitive advantage.
Investment Focus
The Small Cap Growth investment approach is fundamental, bottom-up in nature. Historically, Century has emphasized service-based companies that are expected to have a return-on-equity (ROE) in excess of 15% annually. We place a premium on the quality and consistency of a company’s profitability in conjunction with assessing its growth prospects. We are growth managers, but we pay attention to valuation in our decision-making process in an attempt to buy high quality growth companies, with durable franchises at reasonable prices. The target market cap for purchases ranges from $250 million to $2.5 billion. Small Cap Growth portfolios typically have 50-70 stock positions. We believe this range of holdings provides a favorable balance between managing a diversified, but focused investment strategy.
Sell Discipline
A sell decision may be based upon a variety of factors, including valuation, deteriorating fundamentals, and/or an event catalyst. Each stock has an internal price target and trimming typically begins as a stock comes within 5% of its price target. Stocks may also be trimmed or sold based on the weighting of the portfolio or a change in market capitalization. Fundamentals that may trigger sales include deteriorating or eroding profit margins or decelerating revenue growth. Sales that are event-driven may be prompted by a change in senior management, insider selling activity, accounting issues, regulatory changes or issues, mergers or acquisitions, balance sheet weakness, and/or potential dilution due to acquisitions or newly granted stock options.