Small Company Equity Portfolios
These portfolios seek long-term capital appreciation by investing mainly in the common stocks of companies with equity market values that are below $750 million at the time of initial purchase. Generally, these portfolios contain 100 to 120 stocks. Investors should expect these portfolios to contained so-called value-priced and growth stocks.
Portfolio managers seek to invest in smaller companies that: (1) have demonstrated above-average growth in revenues and/or earnings; (2) possess relatively low levels of long-term debt; (3) have a high percentage of their shares owned by company management; (4) possess modest price-to-sales ratios; and (5) possess price-to-earnings ratios that are below a company’s long-term annual growth rate.
Because a small company portfolio contains above-average company specific and financial market risks, it is a suitable investment for only that part of an investor's capital that can be exposed to above-average risk. The portfolio is intended for investors who are willing to withstand the risk of short-term price fluctuations in exchange for potential long-term capital appreciation.