Our strategy, step by step.

The Capital Advisors Growth Fund invests in large and medium sized growth companies where we find evidence of positive change and attractive valuation. The portfolio is focused on our very best ideas – around 35 stocks at any given time. We carefully consider the risk-reward characteristics of each stock in the Fund, and we group them into three categories based on these considerations.

Stable Earners are the most conservative category. These are established companies with entrenched competitive advantages and stable outlooks for future growth in earnings and dividends. We seek to increase the Fund’s exposure to Stable Earners during negative market climates.

Accelerated Growers are less predictable, but they can be very rewarding during favorable market climates. Accelerated Growers have historically exhibited more volatility and less predictability, but have generally displayed a potential for greater price appreciation than Stable Earners during favorable market climates. Accelerated Growers exhibit materially higher growth in sales and earnings relative to the overall economy as measured by U.S. GDP growth rates.

Emerging Franchises are the most aggressive stocks in the Fund. These companies break new ground with unconventional business models, or pioneer entirely new industries. Bullish market climates typically reward the unbridled optimism and sense of opportunity associated with Emerging Franchises. These stocks can be rewarding – and fun – when times are good.

We continuously monitor macroeconomic risk factors using objective inputs for valuation, credit spreads and price momentum. These inputs help us define the overall market climate as bullish, bearish or neutral. We then tilt the Fund’s portfolio more conservatively, or aggressively, by shifting the relative weightings among Stable Earners, Accelerated Growers and Emerging Franchises.

Investment Process:

Our process begins with a weekly screening of approximately 1,000 stocks that meet basic criteria for size, financial health and trading liquidity. This screening process includes two filters – one for valuation and a second for signs of positive change. The small universe of stocks that rise to the top of both screens simultaneously might offer a desirable combination of low valuation and near-term positive change.

From here we dig deeper. We break down the financials, speak with management, asses the competitive environment, and review third party research to verify the valuation estimate, and evaluate trends among variables like profit margins, working capital efficiency, relative price strength, insider trading and analyst sentiment. The end result is a focused portfolio of approximately 35 growth stocks, strategically diversified across industry sectors and our three risk-reward categories.

Stocks may be sold if they reach our price target, or if the fundamentals for the company or industry deteriorate materially. The portfolio may also change in response to the overall market climate as we tilt the portfolio more aggressively or conservatively in response to changing market conditions.

Diversification does not assure a profit, nor does it protect against a loss in a declining market.