What We Do

This strategy is designed to provide significant long-term upside potential by making investments in deeply undervalued, out-of-favor, overlooked and/or misunderstood stocks.

The portfolio will typically have an average market capitalization under $500 million. The strategy will generally hold between 10 and 30 names. At times the strategy will hold significant cash. Temporary investments in ETF’s may be used to equitize cash as appropriate, such as during a tax loss harvesting program or in periods of client inflows or outflows.

1102 believes that markets are generally quite efficient, but that institutional neglect leads to frequent and significant mispricings at the very small end of the US equity market. A Special Situations approach entails looking past the obvious to find overlooked value. Earnings are difficult to predict in small companies, while asset values tend to be more stable. When short-term investors take a negative view of a company’s current earnings power, a margin of safety based on assets and/or future earnings power often appears.

The Chief Investment Officer of 1102 brings long experience and expertise in determining the most useful tool(s) to uncover a company’s true long-term worth, along with potential catalysts to cause the value to be realized.

Portfolio holdings will tend to have the following in aggregate:
• Low price-to-book value/price-to-asset value
• Fortress balance sheet
• Strong corporate governance
• Significant insider ownership

As each investment is evaluated on its specific merits, sector weights will vary significantly from those found in standard small and micro-cap indices.

This global large-cap equity strategy is designed to provide tax-efficient growth in both income and principal over the long term. It consists of building a diversified portfolio of high-quality growth companies which on average are expected to grow both earnings and dividends at above average rates.

Both US and International individual stocks are utilized. This provides diversification across sectors and geographies. Foreign stocks are not viewed in a vacuum; they are compared to US stocks in their sectors and industries.

Individual Stock Criteria

• Quality – financial strength, superior management, market leadership, high-quality assets
• Consistent, above-average earnings growth
• Consistent, above-average dividend growth
• High ROE and/or ROA

A company that does not meet all five should be particularly strong on one or more criteria or provide meaningful diversification.

The criteria for inclusion are based on being a growth company. Valuation will be considered in buy and sell decisions. This strategy is best described as growth company investing with a value overlay. Growth at a Reasonable Price (GARP) is a term often used for this type of decision-making process.