Large Cap Growth Strategy

DCM’s Large Cap Growth portfolio consists of 45–60 stocks with market capitalizations greater than $5 billion. The top ten positions, by weight, will range between 30-45% of the portfolio.

As a policy limit, the cash position will not exceed 5%.

Performance Benchmark

The Russell 1000 Growth index is the primary performance benchmark.

Investment Objectives

The portfolio’s (net of fees) return is expected to exceed the Russell 1000 Growth Index over a full market cycle, which we define as a rolling five-year period.

Investment Philosophy & Process

The essence of the Large Cap Growth philosophy and process is to find companies whose earnings and EPS are accelerating. The investment philosophy is earnings-centric, with an emphasis on positive EPS estimate revisions, accelerating EPS momentum, and consistent EPS surprises. As we search for companies with accelerating earnings momentum, we believe that EPS estimate revisions and EPS surprises (relative to consensus estimates) are among the most unbiased “signaling devices” in equity markets, The empirical and academic evidence clearly validates the thesis that the best performing stocks are those with superior earnings momentum, and our analytical approach allows us to identify the best earnings growth stories in the large cap universe.

Subsequently, our sector leaders perform rigorous analysis of financial statements, with a primary focus on the balance sheet and cash flow statement. This careful analysis attempts to gauge whether the company possesses a reasonable debt/capitalization profile, an efficient working capital management strategy, improving cash-on-cash returns, and a rational cash flow utilization.. We also stress-test the strength of debt coverage ratios and analyze debt repayment schedules to avoid refinancing crunches and liquidity mismatches. Finally, we check for accounting integrity by cross-checking operating CFs with reported EPS to ascertain whether accounting earnings are consistent with cash generation.

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December 2011
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Mid Cap Growth Strategy

DCM’s Mid Cap Growth portfolio consists of 45–60 midcap stocks with market capitalizations ranging from $1 billion–$15 billion. The top ten positions, by weight, will range between 30–45% of the portfolio.

As a policy limit, the cash position will not exceed 5%.

Performance Benchmark

The Russell Mid Cap Growth index is the primary performance benchmark.

Investment Objectives

The portfolio’s (net of fees) return is expected to exceed the Russell Mid Cap Growth Index over a full market cycle, which we define as a rolling five-year period.

Investment Philosophy & Process

The essence of the Mid Cap Growth philosophy and process is to find companies whose earnings and EPS are accelerating. The investment philosophy is earnings-centric, with an emphasis on positive EPS estimate revisions, accelerating EPS momentum, and consistent EPS surprises. As we search for companies with accelerating earnings momentum, we believe that EPS estimate revisions and EPS surprises (relative to consensus estimates) are among the most unbiased “signaling devices” in equity markets. The empirical and academic evidence clearly validates the thesis that the best performing stocks are those with superior earnings momentum, and our analytical approach allows us to identify the best earnings growth stories in the mid cap universe.

Subsequently, our sector leaders perform rigorous analysis of financial statements, with a primary focus on the balance sheet and cash flow statement. This careful analysis attempts to gauge whether the company possesses a reasonable debt/capitalization profile, an efficient working capital management strategy, improving cash-on-cash returns, and a rational cash flow utilization. We also stress-test the strength of debt coverage ratios and analyze debt repayment schedules to avoid refinancing crunches and liquidity mismatches. Finally, we check for accounting integrity by cross-checking operating CFs with reported EPS to ascertain whether accounting earnings are consistent with cash generation.

Views from Decatur

December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011

SMID Cap Growth Strategy

DCM’s SMID Cap Growth portfolio consists of 65–80 midcap stocks with market capitalizations ranging from $100 million–$500 million. The top ten positions, by weight, will range between 15–20% of the portfolio.

As a policy limit, the cash position will not exceed 10%.

Performance Benchmark

The Russell 2500 Growth Index is the primary performance benchmark, while the Russell 2000 is the secondary benchmark.

Investment Objectives

The portfolio’s (net of fees) return is expected to exceed the Russell 2500 Growth Index over a full market cycle, which we define as a rolling five-year period.

Investment Philosophy & Process

The essence of the SMID CAP Growth philosophy and process is to find companies whose earnings and EPS are accelerating. The investment philosophy is earnings-centric, with an emphasis on positive EPS estimate revisions, accelerating EPS momentum, and consistent EPS surprises. As we search for companies with accelerating earnings momentum, we believe that EPS estimate revisions and EPS surprises (relative to consensus estimates) are among the most unbiased “signaling devices” in equity markets. The empirical and academic evidence clearly validates the thesis that the best performing stocks are those with superior earnings momentum, and our analytical approach allows us to identify the best earnings growth stories in the SMID Cap universe.

Subsequently, our sector leaders perform rigorous analysis of financial statements, with a primary focus on the balance sheet and cash flow statement. This careful analysis gauges whether the company possesses a reasonable debt/capitalization profile, an efficient working capital management strategy, improving cash-on-cash returns, and a rational cash flow utilization. We also stress-test the strength of debt coverage ratios and analyze debt repayment schedules to avoid refinancing crunches and liquidity mismatches. Finally, we check for accounting integrity by cross-checking operating CFs with reported EPS to ascertain whether accounting earnings are consistent with cash generation.

Views from Decatur

November 2011