Oak Associates, ltd.’s Small-Cap Growth strategy seeks US-listed equities under $3 billion in market capitalization that are likely to experience strong price appreciation. Its companies are expected to display earnings growth above and beyond the market averages due to a competitive advantage or dominant market position. The portfolio holdings are also expected to be focused on a specific niche. This niche focus allows the company to execute better than competitors and avoid challenges from larger firms. The portfolio will invest in growth wherever it is occurring and is not limited by traditional sectors or historical metrics.

The process begins with a top-down look at long-term investment opportunities. Once themes are identified, a fundamental-driven approach is employed to determine those companies that are best positioned to capitalize on the trends identified. An investment thesis is articulated for each holding and the progress toward that thesis is measured. Buy-candidates are evaluated on their position in the industry, the market opportunity, current valuation and risk/reward. An attractive entry point, based on both fundamental and technical characteristics, is then determined. Relative valuation, traditional multiples analysis, and discounted cash-flow valuation methods are considered. Particular attention is paid to the sustainability of earnings.

The strategy holds between 35 and 50 securities and is focused in its best ideas. Sector diversification is utilized, but no specific minimums or maximum exposure is required. The strategy is expected to outperform the market by owning high-conviction ideas, and employing a long-term focus with a thematic overlay. However, no assurances can be made such an investment strategy will result in any such benefits to its clients.

The Small-Cap Growth strategy is managed by Robert Stimpson, CFA, CMT; he is supported by the firm’s Investment Team.

Sell Discipline
Companies within the Small-Cap Growth Strategy are sold from several reasons:

1. Valuation.
  • Excessive valuation and/or competitive pressures.
  • Unsustainable rate of appreciation.
  • Change in the risk/reward assessment.
  • The company's outgrows the small-cap classification.
2. We make a mistake.
  • The investment thesis identified was wrong.
  • A better relative opportunity is found.
3. Merger and acquisition.
  • The company owned is acquired by a large-cap company.
  • If acquisition practices are over-dilutive to existing shareholders.
4. To prevent the "Small-Cap Curse".
  • To avoid risk of a significant correction following strong performance and increased probability of a negative earnings surprise.
  • The rapid breakdown of technically significant levels.

The Small-Cap Growth strategy is also available as a no-load mutual fund, River Oak Discovery Fund (RIVSX).

Small-Cap Growth Strategy
Oak Associates, ltd.
3875 Embassy Parkway - Suite 250, Akron, Ohio 44333
Main Tel: 330-668-1234 Fax: 330-668-2901
Oak Associates, ltd. is an independent investment advisor registered with the U.S. Securities & Exchange Commission.

Institutional Strategies