Investments
We are business analysts first and financial analysts second. We own businesses based on our analysis of three crucial “Cs. Investments must show a catalyst for growth, the continuity to sustain it, and a clockwork knowledge of when to buy and sell.
Investing at Growth Reflection Points
Undiscovered
Emerging Catalysts
Growing Awareness
Broad Analyst Coverage
Consensus Trade
Little attention and low expectations. Product and business case still forming, with limited data and minimal institutional ownership.
Fundamentals improve and a clear growth catalyst emerges. We validate the thesis with proof before investing.
Validation of the catalyst marks our entry point.
More investors take notice. Sustained beat-and-raise cycles drive upward estimate revisions and accelerating growth. The story gains momentum.
The story gains traction. Fundamentals fuel estimate expansion and valuation multiple expansion. Strong fundamentals attract broader analyst coverage.
Broad acceptance with strong institutional support. The opportunity matures with validated momentum and widespread ownership.
Catalyst
A catalyst is a specific and transformative development that changes a company’s growth or valuation in a meaningful way. Characteristics include new leadership, products, or geographic reach.
Continuity
Continuity is how long and how far a catalyst can run. This turns a one‑time spark into growth that can last for years and, and can evolve into a broader, durable theme.
Clockwork
Clockwork is our timing discipline—when to get in, how fast to build, and when to get out. This helps us own the right business in the right size and at the right time.
Analysis
We construct portfolios one stock at a time, after thorough team discussion. We evaluate each stock in the same disciplined manner to construct a portfolio with approximately 90 to 100 of the best ideas. The basic question we ask are below.
Value Proposition
Growth Catalysts
Market Opportunity and Risks
What is the product? How is it sold? Who are the customers?
What is the catalyst?
Who is the competition? How is the competition positioned?
What is the pricing?
Can the catalyst accelerate growth within 6-12 months?
What is the company’s earnings power?
How is the product positioned
vs the competition?
Is the catalyst durable?
What is the size of the market and current penetration?
Does incremental revenue growth drive operating leverage?
Is it growing faster than peers and taking market share?
Why will investors become interested in this story?
Does it have a defensible moat to protect against competition?
Can it build incremental new product innovation?
What are the key risks?
Sell Discipline
The Pier Capital sell discipline is based on three key factors—success, valuation, opportunity, and failure.
Success
The majority of the time we sell or trim a stock because we think it has gotten ahead of itself. We will sell or trim when our thresholds are exceeded, namely, when a position exceeds 4% of the portfolio, or 2.5 times the Russell 2000 Index market cap.
Opportunity
We will replace or trim a holding when we identify a new investment with superior attributes. Just because we trim it doesn’t mean we don’t like it anymore.
Change in Valuation
We may reduce or exit a business when a key fundamental deteriorates valuation, or our business outlook turns negative, or when the business’ valuation exceeds its peers and the market..
Risk Management
Our strict investment guidelines help us manage portfolio risk.
Limit position and sector weights. The portfolio’s sector limits may not exceed 20% of the portfolio or 2 times the benchmark (whichever is greater).
Maintain full investment. We stay invested, typically maintained at 3–5% of the portfolio.
Diversify holdings. Management seeks to reduce single-stock impact by keeping position sizes to about 1.00% of the portfolio, which may increase to 2.00% for top holdings.
Monitor valuation and downside risk. We asses valuations, growth, and risk daily.
ESG overlay. We apply Environment, Social, and Government considerations into our research process.