The Fund's investment objective is to seek long-term capital appreciation and preservation of capital through various economic and market cycles. The Fund will invest primarily in domestic small and mid-cap common stocks, as well as a lesser number of large-cap stocks that meet its investment criteria. The Fund may also invest in other securities that are suited to the Fund's investment objective, including preferred stocks and, to a much lesser extent, debt securities, government securities and illiquid investments. The Fund will typically maintain a portfolio of 60 to 80 securities. It will always be hedged through the use of options and/or shorting of stocks. The Fund utilizes a bottom up approach and seeks dividend paying stocks with the following criteria: low P/E ratios; low price-to-book ratios; and, low price-to-sales ratios all relative to the S&P 500 and Russell 2000 indexes. The net exposure will often be in the range of 30%-60% net long exposure (10%-30% beta adjusted) with little use of leverage.
Fundamental analysis such as studing a company's finanacial reports and SEC filings, as well as developing an understanding of the competitive environment, assessing growth prospects and risks and meeting or speaking with management, customers and competitors are used to validate the Manager's thesis.
The Fund utilizes a number of tools to monitor and control risk. Options are used to limit losses as well as provide income. The Fund employs preset price targets/stops. The Fund uses Portfolio Science risk management software which allows them to monitor VaR, correlation, and beta daily. The portfolio is managed to keep VaR less the 2.5% of assets. There is a 5% maximum long position size; 3% for shorts, at cost, with few exceptions.