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March 10, 2010
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Investment Focus & Products
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For more than 25 years, THB has specialized in the smaller capitalization range
of the US equity market. Today, THB manages micro, small and mid cap portfolios
in a Core-with-a-Value Bias style. THB has maintained its specialized, entrepreneurial
approach to portfolio management while fully resourcing our investment teams with
the analytical tools typically available to larger organizations. As a result, THB
offers clients competitive, focused investment products delivered with the responsive,
personalized client service that is a hallmark of our firm.
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Consistent Investment Philosophy
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Thomson, Horstmann & Bryant’s core investment philosophy has employed a consistent
investment philosophy since the firm’s inception in 1982. We believe that value
outperforms growth over long periods of time, but pure value investors may be subjected
to overly dramatic swings in performance through shorter time periods. We believe
that by actively managing well-diversified portfolios in a Core-with-a-Value-Bias
style, we may capture a percentage of the market upside in flat to growing markets
with lower levels of volatility—providing our clients with risk-adjusted performance
over full market cycles.
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Core-with-a-Value-Bias Approach
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THB builds portfolios using a Core-with-a-Value-Bias approach. We look for solidly
managed, financially sound companies that still possess the potential for further
price appreciation. Through fundamental research and analysis, THB manages a large
universe of Russell 2000 companies down to 500 candidates for our portfolios. Securities
eligible for purchase possess many of the following characteristics relative to
their respective sectors:
- Modest enterprise value to sales ratios;
- Modest price to earnings ratios;
- Significant cash flow;
- Attractive price to adjusted book values;
- Potential for acquisition;
- Sound business plans and strategies; and
- Meaningful management ownership.
THB's bottom-up investment process is driven by fundamental research. Our investment
team meets with the management of approximately four hundred companies per year.
Combining data gathered first-hand from those interviews with both internally generated
and externally resourced analysis, we select securities that we believe the market
has undervalued. Specifically, THB attempts to identify securities where the market
has:
- Significantly undervalued the potential of the company relative to its operating
structure and profitability;
- Failed to recognize the company’s inherent value on a cost replacement basis; or
- Has failed to recognize the resulting synergies with respect to potential acquisition.
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Benchmarks:
The Russell 2000 Index (Index) is used as a benchmark to measure the portfolio's
performance. The Index is used to measure the performance of U.S. small company
stocks. The benchmark is for illustrative purposes only and is not intended to imply
the portfolio's past or future performance. The Index assumes dividend reinvestment
but does not include investment advisory fees or other expenses or transaction costs.
The Index is unmanaged and not available for direct investment. The Russell 2000
Index measures the performance of the 2,000 smallest companies in the Russell 3000
Index, a broad based index that represents approximately 98% of the value of the
investable U.S. Market. However, the index makes up only about 8% of the total market
capitalization of the Russell 3000 Index. The benchmark is used for comparative
purposes only and may not reflect the risk or investment style of THB's strategy.
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