Earnings performance drives stock prices

Investors enjoy countless options in terms of choosing the best path to reach their financial goals. We consider growth to be the key ingredient to any successful long-term investment plan. Growth equity investing based on individual-company earnings trends has been our hallmark since our founding.

Growth Strategy At A Glance

Individual-company fundamentals determine stock prices

While interest rates, geopolitical events and other macro forces can move “the market” for fleeting periods, each company influences the long-term direction of its share price through operational execution.

Companies that top expectations attract positive attention

As growth investors, we view earnings growth as the ultimate sign of a company’s success. We believe companies with earnings power that the broader investment community underestimates offer the best potential for share price appreciation.

Exhaustive research legwork isolates companies with the most potential to positively surprise

We believe the best way to gain insight into individual-company earnings trends is to stay connected to the front lines of the economy through ongoing interviews with management teams, customers, competitors and suppliers. Exhaustive research is our firm’s central focus.

Each company earns its space in the portfolio by showing greater promise than an existing holding

Consistent with our individual-company focus, a portfolio position is prime space only available to a company with a better fundamental profile than an existing holding. Portfolio construction is a function of our continuous search for individual-company earnings strength.

Valuation sensitivity is critical to investment success

High valuations invite risk. To maximize upside potential and mitigate downside risk, we focus on rapidly growing companies that also sell at reasonable share prices relative to earnings.

Bottom-Up Research

Exhaustive, company-by-company research is the Friess advantage

We dedicate our resources to conducting research legwork, which entails regular interaction with people on the front lines of the economy. Friess Associates coined the term “trade check” to describe the interviews we conduct with company executives, managers, customers, competitors and suppliers. Trade checks include in-person company visits, trade shows, user conferences and discussions via phone.

The Friess research team conducts hundreds of trade checks each month in its ongoing effort to glean insights on existing and potential holdings. Trade checks represent one of our most fruitful methods of idea generation, with research legwork often uncovering promising opportunities outside of the initial direction of our investigation.

Sell Discipline

Maintaining best-idea portfolios
Forced displacement triggers a sale when assets from an existing holding are needed to fund the purchase of a new, more promising investment opportunity. This policy reflects our appreciation for the time value of the assets entrusted to us. We also sell an existing holding when it reaches our price target, its fundamentals deteriorate or Wall Street becomes overly optimistic about its prospects.

Since we are valuation sensitive, our price targets can be more conservative when compared with aggressive growth investors who are willing to shoulder higher valuation risk. We seek companies with improving fundamentals, so we don’t hesitate to sell a company when it proves us wrong. Also, given that we want companies that top expectations, we move on when we believe consensus estimates overstate a holding’s potential.

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