FG has a deep experience in the small and mid-cap growth stock market. The investment team seeks to uncover high conviction investment ideas in this large, inefficient and often less understood segment of the market.
Formula Growth’s idea sources for new investments include:
v Over 3,000 archived internal company files spanning multiple decades of research and analysis
v 8,000+ investment universe of global small to large cap companies
v Corporate industry sources and contacts
v Direct meetings with management on site and/ord at industry conferences or events
v An extensive network of buy/sell side contacts globally
Each new investment idea has a script based investment thesis and must have measurable catalysts with the potential to yield 20-50% over a 6 to 18 month time horizon.
The investment team looks for long investment positions that are overlooked or undervalued situations based on fundamental valuations.
Typically they:
v Are growing revenue and earnings rapidly and above consensus
v Are experiencing a cyclical recovery in the industry in which they participate
v Are restructuring or cutting costs to improve profitability
v Have low absolute valuations
v Have security prices that have been impaired by temporary events
Short investment positions include those that are overvalued or that have structurally broken business models or operate in challenged industries.
Typically they:
v Are experiencing a cyclical slowdown and lowered margins
v Are likely to face loss of market share, revenue, or earnings due to competitive displacement
v Have significant debt refinancing risk
v Have high absolute earnings or cash flow valuations