SMid Strategy
Century SMid strategy was closed to new investors in 2008.
Investment Team
Lanny Thorndike is Lead Portfolio Manager and Kevin Callahan is Co-Portfolio Manager for the SMid separate account strategy. Lanny and Kevin are supported by a Director of Research, 6 equity analysts, and 2 equity traders.
Investment Philosophy
The SMid team’s investment philosophy operates on the thesis that capital markets, especially in the small-mid 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-mid 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 SMid 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 $500 million to $10 billion. SMid portfolios typically have 55-75 stock positions. We believe this range of holdings provides a favorable balance between managing a diversified, but focused investment strategy.
Sell Discipline
Any sell decision is based upon 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 as they approach 5% of the portfolio at market value. Sales may also occur when a stock moves above a $10 billion 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.