Tag - Netl

Jim Oberweis is president and lead portfolio manager of Oberweis Asset Management and president of The Oberweis Funds. Oberweis Asset Management, Inc. is a growth equity investment management firm that manages approximately $1.5 billion in micro, small, and small/mid capitalization growth strategies globally, primarily for institutional investors and its own proprietary mutual fund family. Oberweis is a Chartered Financial Analyst. He earned an MBA with high honors from the University of Chicago and a B.S. in Computer Science from the University of Illinois.

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

“We look for companies that are growing at very rapid rates and are doing so by creating new products that are innovative a way that no one has been in the past. Our favorite type of company is one that comes in with a new product or service and is able to either create a new market or create significant market share by winning market share from competitors. We like industries where there’s the ability to integrate a set of new providers of services.

“We’re generally looking for a minimum growth rate of 30% annually. In many cases we’re looking for growth rates much faster than that. The average company in our portfolio is probably growing faster than 50% a year. You can understand why a 200- or 300-basis-point change doesn’t have as much impact on a company that’s growing 50% a year. Those companies are doing something different and not just trying to grow earnings at a rate commensurate to the overall economic environment. 

“We pay a lot of attention to valuation. If we can buy companies with those high growth rates during periods in which nobody loves them and valuations are sharply below their historical norms, that is a terrific opportunity. Few people actually do it because usually the times when valuations are lowest are falling periods in which the area has reentered the form without marketplace. It’s those times when few . . .

Watch this section for a periodic look at topics of interest from the staff of SmallCapInvestor.com.

It’s been a rough ride for technology this year. However, the small-cap tech space looks to be bottoming out, which means opportunities are emerging for investors.

The tech-heavy Nasdaq index is down roughly 5% year-to-date, though narrowing from a wider negative margin of as much as almost 17% in March.

“[Small-cap tech] has been an area that has been very much a stock picker's market rather than a broad coverage,” said Joe McNay, chief investment officer and managing principal of Essex Investment Management Company, in an interview last week.  “Overall, I think it's been an improving area that many stocks are making bottoms in — as a whole it continuously looks a little better. We’re at a point where there are lots of opportunities.”

Much like the economy, technology stocks exhibit a degree of cyclicality. The first expenditures that businesses typically cut back on are technology purchases. On the consumer side, disposable income is funneled into necessities first and discretionary items second.

The consumer could remain under pressure, as rocketing food and oil prices coupled with credit that is hard to come by and rising unemployment levels have crimped purse strings this year. However, as the Federal Reserve’s rate cuts begin to kick in and create greater liquidity, corporations should get back on their feet as they . . .