STRATEGY


  • FIND UNDERVALUED STOCKS WITH STRONG BALANCE SHEETS.
  • TAKE ADVANTAGE AND PROFIT FROM MARKET INEFFICIENCIES UNIQUE TO THE SMALL CAP SECTOR.
  • USE FUNDAMENTAL AND TECHNICAL ANALYSIS, NOT JUST ONE OR THE OTHER.
  • ACHIEVE END GOAL OF SUPERIOR AND CONSISTENT LONG-TERM OUTPERFORMANCE.


     Our strategy brings you financially strong undervalued technology stocks. By finding stocks that have lower than average price-to-book and price-to-sales ratios we lower our overall risk. We don't just look for undervalued stocks. Some stocks are always undervalued.  We look for stocks that are likely to be only temporarily undervalued based on the fundamental aspects as well as on a stock's previous trading pattern. 
     We only select stocks that have strong balance sheets. Our typical recommendation trades at between 1x and 2x tangible book value. Tangible book value acts like a safety net, especially when it comes to technology stocks because most of the tangible book value tends to be comprised of current assets. Our typical recommendation also has a lot of cash in the bank and no debt.  A cash rich company has many options open to it.  A company can spend money to improve products, acquire and/or develop new products,  or buy back shares as a way of increasing shareholder value.  When you stick to only financially strong companies you lower your risk and increase your chance of outperforming the market.
     Many people think the only way to outperform the market is to take on more risk.  We disagree.  We believe that you can actually find stocks that have lower than average relative risk and at the same time more potential reward than average.
     Understanding and mastering the relationship between risk and reward is the key to successful investing.  There must be a very favorable combination of low risk and high profit potential.  Most people fail at this because they consistently underestimate the risk and overestimate the potential of the stocks they buy.   
     Gross margins, operating margins, earnings, earnings potential, and valuations compared to a company’s peers are also examined.  In addition to fundamental analysis, the technical aspects are looked at for potential bottoming or breakout chart patterns.  We don't recommend a stock just because there was a technical breakout or other technical pattern that we liked. The stock must also be undervalued and have the fundamentals to support higher prices.