Mary Lisanti's favorite small-cap stocks

A 28-year veteran of small- cap growth research and investing, Mary Lisanti is president and chief investment officer of AH Lisanti Capital Growth, where she manages the firm’s small-cap growth strategy. Lisanti has spent 12 years as a small-cap analyst and strategist on Wall Street, holding such positions as CIO of ING Investments, senior portfolio manager for the small-cap growth and mid-cap growth strategies at Strong Capital Management and managing director and head of the small/mid-cap team at Bankers Trust Company. Lisanti was named Fund Manager of the Year in 1996 by Barron's.

What qualities do you look for in a small-cap stock? Have your criterion changed given the current macro environment?

“We are growth investors. Therefore what matters to us most is the ability of the company to grow its earnings at an above average rate for a period of time. We do a lot of research, such as interview management, talk to customers, look at research reports and 10Ks and 10Qs, among other things. The majority of companies in which we invest tend to have a product or service we believe is unique and different; they tend to have management teams that we think highly of, and they have strong balance sheets — no debt and several dollars per share in cash.

“My criterion has not changed. The only difference is we probably spend even more now with management.  The quality of management really makes the difference. It’s huge. In the 80s, you would score them in your research reports. People have gotten out of that habit because everything’s been easy and now, now I think . . .

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