WCM uses a bottom-up approach that seeks to identify companies with above average potential for growth in the rate of return on invested capital and assets. The portfolio typically holds 55-75 companies. Our investment process seeks companies with:
Sustainable and growing competitive advantages
Corporate cultures emphasizing strong, quality and experienced management
Potential for investment capital growth
We believe that attractive returns are achieved by finding businesses with inflections in the cash flow rates of return or the asset growth rates. These inflections can lead to significant value creation if they can be sustained. We seek businesses that possess an expanding competitive advantage demonstrated with an increasing Cash Flow Rate of Return on Investment and a Growing Invested Capital Base. As a business progresses through its life cycle we look to determine the sustainability of the margins and growth rates.
The Small Cap Growth strategy's investment universe is comprised of US businesses with market caps above $300 million and below the largest in the Russell 2000 index, at time of purchase.
Ideas are generated on an ongoing basis as we work to assess the addressable end markets, competitive positioning, and trajectory of the companies in the investable universe. Our emphasis is on understanding the business drivers of the returns on invested capital, the opportunities available to companies to deploy additional capital at attractive rates of return, and the ability of management teams to capitalize on those opportunities.