The Small & Mid Cap Growth strategy focuses on stocks with a market cap of $250m to $10 billion. This system also allocates a portion of the portfolio to short hedge trades.

This system uses a proprietary 4 level scanner comprising technical, fundamental and factor-based quantitative analysis. The bullish trades are typically open for 90 to 180 days. Four percent of capital is allocated to each trade.

The foundation for this strategy is that academic studies show that small cap companies historically generate higher annual gains over the long run. Moreover, when they break up through major resistance levels they will move more explosively generating higher gains in shorter periods of time.

According to Ibbotson Associates, an investment-consulting firm that tracks long-term market data, small caps have increased in value by an average of 12% per year between 1927 and 2007. Meanwhile, large caps have increased 10% during that same time period.

Small-cap companies deliver higher annual returns because of the following: 1) Temporary valuation disconnects as fewer analysts follow the companies; 2) Fewer outstanding shares available, so when a small company is discovered the stock price will climb quickly; 3) Small companies are usually acquisition targets, which can drive up the stock price aggressively.

Summary of Benefits

• Diversified across approximately 23 stocks to reduce single stock and single sector risk
• Follows well defined exit rules to close positions as dictated by the technicals, which increases the probability of preserving gains and capital during periods of high volatility

When appropriate, the strategy allocates 15% to 25% of the portfolio to options-based hedge trades

• Reduces volatility of the portfolio
• Offers protection during market corrections or black swan market crash events

Sophisticated analysis comprising technical, fundamental and factor-based quantitative analysis

• Identify stocks that have moved into high probability technical setups, including:
  • Accumulation and distribution
  • Relative strength
• Identify stocks with strong fundamentals, including:
  • Sales growth
  • Earnings growth
  • Pre-tax profit
  • Return on equity
• Factor-based quantitative screen to identify stocks with the following:
  • Have high probability of making a move up or down
  • Have high probability that the magnitude of the move will be significant