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Herndon Strategies: Large Cap Value Equity, abstract image

  1. Domestic Strategies

Small Cap Value Equity

Small Cap Value Equity

Our value philosophy preaches that true value is defined by companies that trade at a discount to what their fundamentals merit. Identifying sound companies which happen to be out of favor with investors due to temporary conditions has historically proven to be a very successful strategy as their true value is ultimately recognized in the marketplace. Our investment process wraps our strategy around these prospective holdings in a way that enhances the upside case of our holdings approaching intrinsic value while also maintaining a keen awareness to risk management.

  • This product is designed to give our clients exposure to companies which are undervalued versus their peers but have demonstrated the ability to produce better than market returns. 
  • The goal of the product is to outperform the Russell 2000 Value Index over a market cycle. 
  • Quality and liquidity are highly emphasized. 
  • A rigorous risk management process is applied during construction of the portfolio. 
  • The portfolio seeks to be fully invested at all times.

Supplemental Information

Small Cap Value Fact Sheet 

Our Systematic Process

Strategy Icon: stock selection

Stock Selection

  • Step 1: Identify Value Creating Opportunities
  • Step 2: Qualify for Potential Inclusion
  • Step 3: Fundamental Scoring System
  • Step 4: Fundamental Analysis
  • Step 5: Initiate Position

Strategy Icon: sector allocation

Sector Allocation

  • Step 1: Compare Propensity of VCOs in Russell 2000 Index to each sector in Russell 2000 Index
  • Step 2: Calculate Target Sector Weights based on Russell 2000 Value utilizing information from Step 1
  • Step 3: Adjust Portfolio

Strategy Icon: risk management

Risk Management

  • Sector diversification rules
  • Security diversification rules
  • Seek to be fully invested
  • Approximately 40 - 70 securities
  • Top 10 positions are earned not purchased

Strategy Icon: sell discipline

Sell Discipline

  • Monthly Sector Adjustments
  • Profit Taking
  • Fundamental Assessment
  • Conviction Check