Formula Growth employs a number of quantitative and qualitative analytical tools in the process of identifying superior investment opportunities in a crowded equity marketplace:

Formula Growth invests in U.S. growth companies with outstanding management, strong brand identity or prospects, a dedicated customer focus, and a record of demonstrated financial performance.

Security selection is based on "bottom-up" research of individual companies rather than on broader economic analysis or themes. Less emphasis is placed on macro-economic, interest rate, market or sector forecasting.

Formula Growth does not try to time the market. Portfolio turnover (trading) is low. The average holding period for stocks in the portfolio is two to three years.

Earnings per share growth is the dominant variable monitored in the management of Formula Growth portfolios. The formula employed is an earnings growth rate of a minimum 20% per year.

In growth investing, diversification is critical. Formula Growth portfolios employ significant diversification by holding a relatively large number of stocks. This ensures that the risk of any particular security to the overall portfolio is predetermined and can be effectively managed over time.

As Formula Growth's asset base is limited by design, it is possible for the managers to take positions in small companies which can ultimately have a meaningful impact on overall portfolio performance.

Another element of the firm's risk management strategy is to occasionally purchase very small portfolio positions in order to "incubate" investment ideas whose potential may require time and/or additional capital in order to be realized. Exposure is increased as expectations are met or exceeded, provided valuations remain reasonable.

Proven winners are held in the portfolio, irrespective of company size, if growth fundamentals remain intact and valuations reasonable.

Corporate developments as well as financial results are carefully monitored. Regular management contacts are maintained at least annually.

Companies that do not meet expectations or exhibit deteriorating fundamentals are sold. In addition, holdings that become significantly overvalued relative to their long-term target are reduced in size or sold entirely.