At Timpani, we believe that earnings drive stock price performance. By combining fundamental research with an analysis of estimate revisions, we firmly believe we can identify and purchase underestimated growth that exists between a company's business strength and the market's expectation of that strength. We add exposure to stocks where growth is being underestimated, or where there is a positive perception gap and we reduce exposure to stocks where growth is being overestimated, or where there is a negative perception gap. This phenomenon exist because the market is slow to react to incremental, relevant changes in a company’s fundamentals.
Using growth gaps to guide our decisions causes us to minimize two behavioral mistakes of growth investing: selling winners too early, and not selling losers quickly enough.
The investment team believes that outstanding companies with superior earnings and revenue growth will outperform the market over the long term. Analysis of economic conditions and secular trends provides exploitable investment opportunities, specifically in the small capitalization sector.