Peter M. Ward

VAM employs a bottom-up approach to portfolio management in the small-cap arena. Primary emphasis is placed on identifying companies that have a recent history of positive earnings surprise and upward revisions in consensus earnings estimates. They believe that earnings surprises and estimate revisions are better predictors of future stock price performance than more traditional approaches that are based on minimum absolute growth targets. VAM begins their investment process by screening for companies that rank in the top 20% of all companies based on earnings estimate revisions and quarterly earnings surprise. Further emphasis is placed on companies where VAM's internal expectations are materially different from that of the consensus. Cash Flow Return on Investment is the key metric on which they focus to determine the longer potential earnings power of a company. In the next step, technical analysis is used to provide market confirmation of VAM's fundamental findings. They use technical analysis not only for confirmation, but also to establish a framework for risk versus reward. Sector selection or rotation is not a primary focus. However, this does not preclude the firm from having several companies from a particular industry or sector in the portfolio at a given time. Risk management at VAM emanates from their sell discipline. Portfolios are reviewed on a daily basis in an effort to ascertain the performance of each position. A stock is sold or reduced in size when a company does not meet internal expectations, which may or may not be similar to Wall Street expectations. A stock may also be sold due to a change in strategic market outlook, becomes fully valued or a better idea develops.