Small-Company Investing Using the "Oberweis Octagon"
You don’t need to be a spendthrift to be aggressive. That, at least, is the underlying belief of Oberweis Asset Management, which through its family of mutual funds, seeks rapidly growing companies and invests in those that they feel are attractively priced.
This is a process the company terms “AGARP”: aggressive growth at a reasonable price.
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Guiding this process are eight points that make up the “Oberweis Octagon”:
- Rapid annual growth in revenue;
- Rapid annual growth in pretax income;
- Low price-earnings ratio in relation to underlying growth rate;
- Products or services that offer the potential for strong future growth;
- “Favorable” recent trends in revenue and earnings growth, ideally showing acceleration;
- Low price-to-sales ratio;
- Review of company financial statements, especially the footnotes, to attempt to identify future problems; and
- Strong price strength relative to the market.
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