Mr. Profit: We are a large cap equity firm, primarily focusing on institutional asset management. We currently manage in excess of 245 million in assets under management. Our investment process is best described as valuation-sensitive growth investing. What we invest in are companies that are trading at a discount to our calculated intrinsic value, for reasons that we think are correctable from a perception standpoint in the market. Secondarily, we invest in companies that are growing at a faster rate than the benchmark average on a trailing three- to five-year basis. We end up holding a portfolio of between 37 and 45 securities, each accounting for between 2% and 3.5% of the entire portfolio. Historically, we have exhibited strong performance. Six of the last seven calendar years, we have outperformed the S&P 500 and Russell 1000 Indices. We have been able to really provide consistent, high, risk-adjusted return to our clients. This has resulted in a very fast growth rate for Profit. We are picking up more and more clients, and we are excited about that. The PIM Style (Profit Investment Management Style) enables us to provide an investor with a pretty good degree of probability that they will receive alpha versus the benchmark, while limiting risk through careful stock selection. We are absolutely bottom-up fundamental stock pickers. We use the raw data, the 10-Q's, the SEC filings by companies, to build investment stories of the companies which we would like to consider for inclusion in our portfolio. We have low turnover in the portfolio, in the 30% to 40% a year range. This style of investment leads to a high degree of tax efficiency. If tax efficiency is an issue for you, we are good at that, but it doesn't really play directly into our investment process. Just being buy and hold investors provides you with some degree of tax efficiency. We also run a social product under the same investment style, which we subadvise. It is a portfolio for the Calvert Fund and their balanced portfolio. The performance of that has been as strong as our Profit Fund. We've managed that since November 2002. We use language that people understand when talking about the investing process. It is important that investors know what we are talking about. Although we are concerned with beta and most of the modern portfolio theory that other investment managers are concerned with or aware of, we feel strongly that when we are talking to investors, or the public at large, we try to speak in common, everyday language about what we are trying to do. The bottom line is that even if you say the market is efficient, we don't argue that, but we do think that there are times in the market cycle when there is a disconnect between the company's market valuation and the company's valuation as an ongoing entity. Whether you are looking at discounted cash flow analysis or some other fundamental analytics, you can find gaps between the current stock price of a particular company and the actual projected market value. To the extent that we can find companies mispriced that are growing at a fast rate, that have high return on equity and strong balance sheets, we'll add securities to the portfolio. We are broadly diversified, with holdings in almost all sectors in the marketplace, but that's not really a primary consideration. Over- or underweighting of sectors is the result of bottom-up stock picking.
Tickers included in this excerpt: BAC, BRL, BSX, FNM, FRE, GDT, MDT, MOT, MTG, NOK, PFE, PII, RIMM, VZ
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