On Daruma's Watchmonthly small-cap insights for investment professionalsDecember 2008Vol. 1 No. 4 Welcome! This month's newsletter takes a look at five "vital signs" for gauging the health of the small cap markets. Please reply to share your comments, questions or objections. All the best, Mariko O. Gordon, CFA Founder, CEO and CIO Daruma Asset Management, Inc. Not Dead Yet - 5 Vital Signs for the Small-Cap MarketOne of my favorite books on investing is legendary money manager Marty Sosnoff's Humble on Wall Street, published in 1975. It's a hilarious romp through the late-60s gunslinger's market and the vicious 1974 bear market. The war stories contained within remind me that precious little has changed when humans and markets collide. Among the many gems, the following unforgettable lesson is my favorite:
Given that this grizzly of a bear market has flung a lot of dead fish around, I thought I would remix Sosnoff's story with an idea from Calculated Risk, our favorite credit market blog. Specifically, we've come up with our own list of vital signs for the small-cap market (and the fish that are still swimming). We call it the Daruma Pompano Index (DPI). Here's how it works... We ran an elementary screen on November 30th, deliberately casting our net wide: Stocks at or under $2 billion in market cap; listed on the NYSE, Nasdaq or the AMEX; with sales of some kind, even if only one dollar. 3,736 companies made the cut. DPI findings regarding these companies:
So there you have it: the five vital signs of small-cap life worth watching. We'll update these monthly, and for now, let's hope that Purina can ship enough chow to keep these fish growing.
DIY DarumaDaruma (dah-ROO-mah) was a fifth-century Indian monk who reached China after a perilous three-year sea voyage and became the founder of Ch'an (Zen) Buddhism. He is said to have trained the warrior monks of the Shaolin temple in Kung Fu, crossed the Yangtze River on a reed and meditated continuously for nine years (losing his arms and legs in the process). Many of the tenets of Zen Buddhism (separating illusion from reality, nonattachment to emotions and ideas, self-discipline and embracing impermanence) are also key to successful investing, and many of the qualities Daruma is best known for are those we seek to emulate every day. A popular form of Daruma in Japan is the papier-maché doll, traditionally purchased at New Year's. The owner commits to fulfilling a goal through hard work and discipline and paints a pupil in the left eye. Once the goal is achieved, the right eye can be filled in, making the doll complete. And so, not wanting to leave you out of this 1,600-year-old tradition, we're offering you your own Daruma, and the opportunity to strive for your own goals in the coming year. Download the PDF on our website (http://www.darumanyc.com/pdfs/DIY_Daruma.pdf), print, fold and cut as indicated, and voila! All the best for a goal-reaching 2009, from all of us at Daruma. ----------------------------------------------------------- And speaking of achieving personal goals, the city of Obama, Japan has created its own, custom Obama daruma, in celebration of you know who. The Daruma is called "Urushi Daruma," ("urushi" means "lacquer"), Obama (the city) has sent this daruma to Obama (the man). ----------------------------------------------------------- Is Daruma ForYou(ma)?Our company continues to expand; we have created a new position of Quantitative Analyst/Data and Text Miner and are currently interviewing candidates. If you (or someone you know and respect and want to pass this along to)... ... have outstanding applied math and computer science chops ... are entrepreneurial, creative and have a voracious, wide-ranging curiosity ... are excited by the prospect of driving our fast, robust, scalable, custom-developed data/text mining Ferrari This may be for you. Follow this link for more information: (http://www.darumanyc.com/newsletter/documents/2008_12_03_job.pdf) -----------------------------------------------------------About UsFounded in 1995, Daruma Asset Management invests in a high-conviction portfolio of no more than 35 small-cap stocks.Our firm is 100% employee-owned, and manages roughly $1 billion for public and corporate pension plans, endowments, foundations and individuals. Our small-cap composite has an annualized return net of fees of 13.0% vs. 7.8% for the Russell 2000 since inception (7/28/95 through 9/30/08). (Notes to Performance) For more information about the work we do, please visit us here. |
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