Sell Discipline

"No stock is a perpetual hold."

-Richard H. Driehaus

Driehaus Capital Management continually monitors each portfolio with particular emphasis on any change in the fundamental factors that could impact current or future earnings. We find that as new opportunities present themselves, earlier investments are often reaching their maximum level of growth. Changes in any of our three investment criteria can trigger a sell decision.

The Sell Criteria

Objective Fundamental

• Decelerating of earnings and sales growth
• Reduction of backlogs
• News indicating deteriorating fundamentals
• Negative earnings surprise

Security Timeliness

• General price stagnation
• Excess price correction
• Unfavorable volume characteristics
• Decreasing relative strength

Subjective Fundamental

• Poor earnings quality
• Declining industry appeal
• Capacity over-expansion and price weakness

We watch each stock moment by moment and are quick to reverse and change course if a stock is not performing well. We would rather take a series of small losses to avoid larger losses, in an effort to ensure our investments are concentrated in securities with the greatest likelihood of capital appreciation.