Polen Capital Slide 1

A Concentrated Approachwithin a Global Universe

U.S. Small Company Growth Portfolio

The Polen Capital U.S. Small Company Growth strategy seeks to achieve superior long-term performance by focusing on dynamic companies with low to moderate risk and the potential for sustained double-digit annual earnings growth.

“We believe that consistent earnings growth is the primary driver of intrinsic value growth and long-term stock price appreciation,” explains Tucker Walsh, U.S. Small Company Growth Portfolio Manager. “Accordingly, our efforts focus on identifying and investing in a concentrated portfolio of high-quality small growth companies that are able to deliver sustainable, above-average earnings growth.”

The strategy concentrates primarily on U.S. stocks with market capitalizations in the range of about $500 million to the largest stocks of the Russell 2000 (about $3 billion), although it may also invest in some foreign companies through ADRs (American depositary receipts).

The primary objective is to maintain a high conviction portfolio of about 25 to 35 stocks with robust or increasing margins. The Portfolio tends to have greater allocations to stocks of the faster-growing industries, such as the technology, health care and consumer sectors, although we look for unique growth opportunities across all sectors.

Investment Process

The strategy concentrates on small, growing companies with the potential for sustained growth of earnings and revenue. The process is entirely bottom-up and relies heavily on new idea generation. This is done through a combination of generating organic ideas, developing bottom-up themes, and using front-end screens. We build our portfolio through a disciplined and active management approach:

  1. Quantitative Screening: We begin the portfolio selection process by screening well over a thousand stocks in the small stock universe to identify companies with strong sales and earnings growth rates, narrowing the field to about 150 companies. Our quality criteria include profit margin, return on equity, and earnings stability. We tend to focus on industries with the greatest growth potential, such as technology, health care and consumer.
  2. Evaluating Management: We meet with or speak with the management team of every company we invest in to assess their management style and their ability to generate strong returns on capital over a sustained period.
  3. Narrowing the Field: The Small Company Growth Team deepens its fundamental research on the individual companies with the goal of building a list of companies that exhibit secular growth opportunities. The Team believes the focus on secular growth ideas will identify companies that are true differentiators in their industries, show sustainability in earnings growth, demonstrate incremental operating margins, indicate the ability to generate internal cash flow to fund their growth, and will have business models and drivers that are generally less sensitive to changes in the direction of the economy or other macro factors/conditions.
  4. Portfolio Construction: Once the fundamental research and management assessment has been completed, the portfolio manager decides whether or not to add the company to the Portfolio – and in what quantity. The portfolio manager continues to evaluate the performance of each holding in the Portfolio, retaining the stocks that continue to meet our criteria and eliminating the ones that fall short. We look for companies we believe we can hold for at least five years, and we anticipate an annual turnover ratio of 30% or less.

Risk Management Philosophy

“Based on our philosophy, we define risk as the permanent impairment of capital,” explains Mr. Walsh. “We primarily seek to control risk at the individual security level. As bottom-up stock pickers, we evaluate the companies in our coverage list one at a time.”

If there is not complete conviction in a company’s ability to deliver solid performance over a period of several years, the stock will not be considered for investment in the Portfolio. The Small Company Growth Team seeks to limit risk in the Portfolio by raising the bar in the selection process, limiting the Portfolio’s holdings to companies it believes believe possess superior business models (high return on equity, strong free cash flow and solid balance sheets) and by limiting the number of holdings.

The fund also addresses risk by typically beginning with a small position in a new holding (1.5 to 3%) and slowly building up that position over time. Typically, the position may grow to 4 to 5% of the Portfolio, with 10% as the maximum position for most holdings unless we feel the risk/reward of the investment is particularly compelling.

Fund Manager

The U.S. Small Company Growth Team is led by Tucker Walsh, a veteran of more than two decades in the investment management profession. Prior to joining Polen Capital in 2017, Mr. Walsh spent 10 years as CEO and Head of Portfolio Management at Copper Rock Capital Partners, and nine years as Managing Director and Head of Small Cap Growth team at State Street Research. He also served as a research analyst at Cowen & Co., Merrill Lynch & Company, Cowen Asset Management and Chilton Investment Company.


We primarily seek to control risk at the individual security level. As bottom-up stock pickers, we evaluate the companies in our coverage list one at a time.

Tucker Walsh   |   Head of the Small Company Growth Team & U.S. Small Company Growth Portfolio Manager

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