A: Our target for the fund is 50 holdings so, basically, when we find a stock to buy we buy a 2% position. We are in the small-cap core category, which means we have both growth and value companies. We usually have more growth stocks than value stocks, but that can fluctuate with the time period.

Q: What kind of benchmark do you generally look at?

A: The Russell 2000 is probably the best readily available benchmark for the small-cap area.

Q: Do you try to follow the sector breakdown in your fund according to the index?

A: No, we don’t. We are bottom-up stock pickers. We look for ideas one by one. We don’t try to match the sectors in any index, and we don’t decide that we have to own stocks in a particular industry and go looking for the best stocks in that industry.

Q: The micro cap sector is fairly volatile. How do you handle the volatility in terms of the stocks being thinly traded or liquiditywise?

A: Liquidity is an issue both when you buy and sell. You just have to be careful and take the necessary time to buy or sell positions. It all depends on the stock. A lot of stocks can be bought or sold in a day or two. But other stocks, when there isn’t anyone on the other side, then you need to work it carefully with limit orders or with a trader you can trust with discretion.

Q: Do you follow any rules of procedures as to whether to hold or sell the stock?

A: That depends totally on the individual company. If a stock we bought suddenly drops 20% and violates technical support, then sometimes we’ll sell it after talking to management and doing whatever work we need to do. We may decide that we were wrong and the chart was saying to get out. But in other cases, for these small stocks to move 20% in a matter of days, it can be just a natural part of the process. We look at each situation independently.

Q: How does your micro-cap fund differ from other micro-cap funds in terms of your approach in investing?

A: Our multi-disciplined approach of using business fundamentals and technical price charts is different from most small or micro-cap funds.

Q: Do you insist on meeting management before you invest?

A: In the majority of cases, we meet with management before we invest. We think this is very important.

Q: If you are sometimes looking for growth companies, how do you arrive at the future projections of earnings?

A: In many cases we have earnings estimates that have been developed by analysts, but in other cases there aren’t any analysts following the company and management doesn’t give guidance. A lot of times it is difficult to have firm earnings estimates for the future. That isn’t something we necessarily require. We’re looking more for a change such as a new product that gives us confidence that they can grow their revenue and grow their earnings.

Q: How do you come to a judgment that the company may have a good product? Sometimes the market doesn’t think that and doesn’t embrace it as well as it should and then you obviously are disappointed in the revenue earnings growth.

A: That can happen. Once you buy a company you still have to monitor it on a going forward basis, which means watching as the revenue and earnings come out each quarter, and watching the chart, and watching for companies that don’t work out the way we thought they would. It’s an ongoing process.

Q: Do you require the companies to have positive earnings, or doesn’t it really matter with the change coming down the road?

A: At the time we invest, many of our companies do have earnings, but that isn’t a requirement. Many times we invest in companies where the loss has been decreasing and we believe, as was the case with BTU, that they are turning a corner and will have earnings in the near future.