Oberweis Emerges at MoneyLetter

12/20/2002 12:00 am EST

Focus:

Walter Frank

CIO, MONEYLETTER

Readers of The Money Show Digest are familiar with small cap stock specialists, Jim D. Oberweis, and Jim W. Oberweis. In addition to being the editors of the Oberweis Report, the father and son duo are also well known portfolio managers, and one fund that they oversee was just selected by Walter Frank's MoneyLetter as a top "up and coming growth fund". Here's Walter Frank's review.

"Oberweis Emerging Growth fund advanced more than 12% during the month of November. The fund's stake in hardware stocks has been one aid to recent strength, though it held the fund back earlier in the year. Also, the top four individual holdings have posted significant gains for the year-to-date (through Nov. 29). Retailer Chico's (nearly 8% of assets) is up almost 70%. Restaurateur Panera Bread (5.6% of assets) is ahead by more than 40%, while eResearch Technology and ScanSource (each 5% of assets) are up 70% and 53%, respectively. As you can see, the Oberweis team does not hesitate to take sizable positions in favorite holdings. And their method of investing has led not only to large commitments in individual stocks, but hefty sector concentrations as well. The fund has 31% of the portfolio in health care, 23% in consumer services, and 20% in business services.

"The management team of Jim D. Oberweis and Jim W. Oberweis look for rapidly growing small companies. They use an appproach dubbed the 'Oberweis Octagon' which uses eight criteria to find suitable candidates. Revenue growth must be at least 30%, accompanied by similar growth in pre-tax income and earnings per share. The companies in this portfolio currently sport an average growth rate of more than 40%. They should have products or services capable of rapid future growth that is internally generated, not from acquisitions. The Oberweis team wants stocks to be selling at a low price-to-sales ratio and a p/e that is half the firm's projected 12-month growth rate. The firm must be in the early stages of an earnings acceleration, so that a stock price rise might develop from both rapidly growing earnings as well as p/e expansion. Finally, they don't believe in fighting the tape, only buying a stock when it has outperformed at least 75% of other stocks in the market over the previous 12 months." The fund can be reached at 800-323-6166.

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