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Tributary Capital Management seeks to maximize long-term, total return, while limiting risk as much as possible by optimally diversifying the portfolio. Our approach to equity investing identifies growth companies in a broad range of economic sectors and industries in a bottom-up process. We search for companies that have established a sustainable competitive advantage. Our mission is to discover companies with growth characteristics that are superior to their peer group and to establish positions in these companies at a reasonable valuation. We believe active portfolio management, based on bottom-up research and disciplined buy and sell decisions, can add value by limiting risk and increasing investment returns over time.
An experienced team of investment analysts, assigned by economic sector and industry, seeks to identify companies with growth rates greater than the market and industry averages. Companies are selected in each industry on their ability to demonstrate a sustainable competitive advantage. Common characteristics include technological leadership, product innovation, research and development advantages, lower cost production, and proven management skill. Companies selected are well established, with ample research analyst coverage, a superior historical record and a reasonable assurance of sustainability of that record into the future. Our investment staff avoids concentrations in economic sectors or industries to reduce risk, diversifying portfolios across a broad spectrum of industries.
An average earnings growth rate for the previous five years that exceeds the benchmark is a primary criterion for equity selection. All fundamental factors play a role in valuing a company for investment, but the price-to-earnings ratio provides the most visible, universally applied metric. Our approach avoids absolute concentrations in individual industry sectors, attempting on an absolute basis to keep allocations to individual industries and economic sectors as low as possible. Some of the fundamental factors include revenue, cash flow and earnings growth.
Strategy and security selection are team processes involving all analysts. Final decisions rest with the Senior Portfolio Manager, David Jordan. Each analyst performs an industry review to identify the most attractive companies in that industry, screen for relative value and then present the results to the rest of the group. The group considers the attractiveness of individual security recommendations. They analyze the advantages/disadvantages of that particular security to the portfolio of securities utilizing a number of variables specific to the industry or economic sector.
We eliminate the stocks of companies whose growth has slowed in comparison to competitors or the market or companies that have failed to meet our expectations. If a stock has lost the competitive advantage within its industry, it is sold. If a stock has risen to the point that the valuation exceeds what we consider the high water mark relative to the forecasted growth rate and to competition, the stock would be sold. If we become aware that a company or its management has engaged in questionable business or accounting practices or its products are determined to pose health or safety risks, the stock is sold.
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