INVESTMENT PHILOSOPHY

Great Oak offers investment advisory services for investors who wish to invest in small and mid-size companies.  We emphasize fundamental research to identify businesses selling below their true value.  We seek to invest in these businesses when their stock prices fail to reflect the full value of the company. 

We look for companies that meet the following criteria:

• Low price-earnings and price-cash flow ratios
• Low price-book ratios
• Low debt
• Strong and stable balance sheets
• Significant cash flow and prudent use of cash flow by management
• Conservative and consistent accounting practices

Each portfolio consists of 30-50 stocks, well diversified across sectors.  However, we will not invest in all sectors at all times.  We intend to concentrate on our best ideas and construct our portfolios from the bottom up.  In our Small Cap product, we buy stocks with market capitalizations of $50 million to $2 billion.  In Small-Mid Cap portfolios, we buy stocks with market caps between $500 million and $5 billion.

We invest in our companies for the long-term, anticipating holding periods of 2-4 years.  Stocks are sold when they reach our valuation targets, when we recognize that there are better opportunities available for the portfolio (crowding out), or when we lose confidence in management’s ability to execute their stated strategy.  With thorough fundamental research and deep knowledge of our companies, we expect to realize the long-term rewards of investing in small and mid-size companies.  We estimate that annual turnover will be under 40%.

Though our goal is to be fully invested, we will not put our investors’ capital to work if we are unable to identify companies that meet our criteria.  Thus, it is possible that cash holdings will be higher than expected from time to time.  We invest a significant percentage of our liquid net worth in our two products, so our interests are directly aligned with those of our investors. 

To minimize the adverse impact that asset size may have on the implementation of our strategies, we plan to close our Small Cap product when it reaches $750 million in assets and our Small-Mid Cap product when it reaches $1 billion in assets.