Fund or
affiliation
- Driehaus Small Cap
Fund
- Bull and Bear
Partnership Fund
Methodology
- Driehaus Small Cap
Fund- Focuses on Small Cap growth stocks which
are under-covered by Wall Street. He uses a pick
stocks based on fundamentals and momentum trade
based on TA.
- Bull and Bear
Partnership Fund- Seeks to remove the impact of
market trend by approximately balancing long and
short stock positions on an ongoing basis.
Research Techniques
Employed
- Looks for earnings
growth, and earnings acceleration. Different
variations: accelerating sales and earnings;
positive earnings surprises; sharp upward
earnings revisions.
- Learn of good growth
stocks from friends, regional brokers, and
staff-analyst who he sends to conferences.
- Early recognition of
new markets in new sectors before the numbers
came through so powerfully, and before Wall
Street starts to cover them. The stock usually
don't have much "left brain" (micro)
factors, growth rate, multiples, etc... Its just
a "right brain" story.
Trading Techniques
Employed
- Direhaus always look
for the best potential performance at the current
time. "Even if I think that a stock I hold
will go higher, if I believe another stock will
do significantly better in the interim, I’ll
switch."
- Driehaus employs TA
when he trades. When a stock is dropping, he
won’t buy even he like the fundamentals. He
needs to see some stability in price action
before buying. Sometimes TA triggers sale of a
current holding.
Risk Management
Techniques Employed
- People believe high
portfolio turnover is risky. High turnover as a
result of taking a series of small losses to
avoid larger losses, in fact is less risky.
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Philosophy
and beliefs
- Far more money is
made buying high and selling at even higher
prices. When he buys, he’d like to see
relative strength in top 10% of the market, or at
least 20%.
- Do what is right,
not what is comfortable.
- Typically, the more
the street covers a stock, the less opportunity
there is.
- Market tend to
confuse short-term volatility with long-term
risk... they don't pay enough attention to l-t
potential.
- If there is a large
move on significant news, either favorable or
unfavorable, the stock will usually continue to
move in that direction.
History and other
facts
- In 1984, started
Richard Driehaus Foundation with $1M contribution
of TCBY stocks. It distributes 5% annually to
charities. By the end of 1991, the foundation had
grown to $20M.
- John Herald’s
America Fastest Growing Companies had a big
impact on Driehaus’ investment philosophy.
If a company’s earnings were growing over a
long period of time, its stock price had to go
the same direction.
- Nietzsche said,
"What does not destroy me, makes me
stronger."
- Advised investors to
develop their own philosophy based on his own
independent research; so that he is able to hold
on to his positions in really difficult times.
- Spends a lot on
technology to support his ideas flow and
information flow.
Examples
- Home Shopping
Network 1986
- US Surgical 1989
Performance Record
- >30% over 12
years: "For the 12 year period... Driehaus
averaged... in excess of 30% (net of all fees)
- Bull and Bear
Partnership Fund returned 67% 1990 and 62% 1991
(before incentive fee). It had only 3 down months
of less than 4%.
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