Quick Take: Jordan Alexander, lead manager of the Evergreen Small Cap Value Fund/A (ESQAX), focuses on companies whose bottom lines are suffering because of short-term difficulties. Potential earnings strength is more important to Alexander, who will buy a battered stock if he thinks its future is bright.
The fund has gained 5.6% so far this year. It returned 17.5% last year, while the average small-cap value fund was up 14.1%.
The $782 million fund is scheduled to close to new investors when its assets reach $900 million.
The Full Interview
“Under pressure” is a phrase Jordan Alexander uses frequently when discussing his investments for the Evergreen Small Cap Value fund. That’s because he typically looks for companies whose stock prices have been squeezed by some sort of temporary problem.
Alexander has no qualms about taking stakes in troubled businesses, provided he thinks they will work their way out of hot water.
A company’s bottom line tends to be hurting at the time he makes his initial investment, so he tries to identify a catalyst, such as a new product or management, that can “unlock its earning power” and boost the valuation of its stock, Alexander says.
Once he’s convinced a company has the potential to fatten its profits over the next 12 to 18 months, Alexander, who hunts for inexpensive stocks, seeks businesses with strong balance sheets and cash flow, and little debt. The Evergreen fund primarily buys domestic companies with market caps of less than $1.5 billion and holds usually 100-150 stocks.