Mr. Astman: First Wilshire started back in 1980, so it's been in operation about 27 years. A predecessor management company was formed in 1977, so we have actually been managing money for 30 years. The firm is comprised of about 15 personnel. We are research-focused; we employ about half a dozen research analysts as well as two portfolio managers, Scott and myself. From a historical performance perspective, we have averaged about a 20% return per annum over the last 20 years. That 20% annual return is pretty consistent over a five-, 10- and 20-year time frame. There is a huge difference in a 20% compounded return over a 20-year period versus a 19% compounded return over that same time span.
TWST: Tell us about your investment style and the companies that you invest in.
Mr. Astman: We focus our attention in the small cap arena. In our eyes, small
caps are less than 1.5 billion in market capitalization. Actually about 80% of
the equity market is made up of small companies, giving us a wide universe to
review. Surprisingly, most of the small cap issues have at most one analyst on
average. Thus there is not wide coverage in this area. This lack of coverage
creates opportunities for our six analysts to uncover some potential jewels.
We look for companies trading at low p/e's relative to the market that have an
above average growth rate and are a leader or have a defendable niche in an
industry. We like companies with little or no leverage and large cash positions,
expanding cash flows and strong revenue growth. A credible, experienced
management team and a company that possesses a sustainable competitive advantage
are extremely important attributes. Other reasons to buy a company might be the
introduction of a new product or a recently completed acquisition. It is a good
idea to not only analyze the last few years of a company's financials but also
look at the present picture. For example, we just analyzed a company whose
revenues dropped by two-thirds but whose profits grew. At a closer look, the
company had sold off a losing division and now were much more profitable.
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