Investment Process

Mastholm uses a bottom-up approach to identify attractive buy candidates for client portfolios. An "open architecture" Bloomberg database, customized by us to our specific needs, tracks over 28,000 companies worldwide and provides continuous reports on all earnings releases and announcements by companies relative to earnings and/or revenues. This database is designed to efficiently and rapidly identify improving company trends on a daily basis.

Detailed reports are developed from our research database and reviewed to identify stocks with the following characteristics:

Quality/transparency - clarity of accounting and confirmation of "real" earnings acceleration
Earnings surprise - operating results significantly higher than analyst expectations
Range of expectations - wide divergence of analyst expectations
Valuation - stock price below historical average range
Liquidity - trading volume that meets our liquidity guidelines

Candidates with these characteristics become the highest priorities for fundamental analysis, where we focus our efforts on a robust interview process designed to uncover those catalysts that drive earnings not fully discounted by the market. Each portfolio manager spends four to six weeks per year abroad visiting companies and leverages company contacts and industry analysts, and cross references competitors, supplies and vendors to help in the final decision making.

Using this process, we seek to build a diversified and risk-controlled portfolio that reflects our bottom-up analysis holding approximately 70-90 stocks.

Country, sector and industry allocations - a residual of the process
Diversify by market cap - about 50% historically in small- and mid-cap stocks
Diversify by country - approximately 25-35 countries
Emerging markets - no more than 20%