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“We believe the value approach to investing can outperform over time because investors tend to overestimate the persistency of high growth rates in one direction and low growth rates in the other. This causes temporary, exploitable dislocations in stock prices and, we believe, opportunities for our Value Team to generate alpha through stock selection.”

— Christian K. Stadlinger, Ph.D., CFA, Senior Portfolio Manager

Investment Approach

The Columbia Small Cap Value II portfolio seeks to deliver capital appreciation and income through an actively managed portfolio of small-capitalization company stocks. Our management team combines fundamental and quantitative analysis with risk management techniques to construct a portfolio of undervalued, misunderstood small-sized companies whose stocks may deliver superior performance over time.

Distinguishing Features

  • Seasoned, stable team has managed successfully through varied market environments
  • Focus on value companies with upward inflection has resulted in strong historical investment performance
  • Robust view of risk has led to consistent risk-adjusted returns

Investment Process

Define and evaluate investable universe: 150 stocks

Concentrate on U.S. companies in the Russell 2000 Value Index and answer the following two questions

  • Where are the values? What are the cheapest 40% by P/E and cheapest 20% by P/B, P/S or P/CF?
  • Which values have upward inflection? Team reviews industry-specific scores, improving prospects and proprietary metrics.
Conduct fundamental research: 90 – 130 stocks

Identify inexpensive stocks exhibiting positive fundamental improvement

  • Focus on three types of value opportunities: company-specific normalized earnings, out-of-favor industries and out-of-the-limelight companies
  • Search for inexpensive stocks on the path to improvement
Construct Portfolio and Manage Risk: 90 – 130 stocks

Determine risk budget and allocate risk to maximize alpha

  • Thorough understanding of risk allows the team to assess risk and allocate it to stock selection
  • Eliminate unintended bets, increase consistency of return and ensure style integrity