5 Simple Steps for Fund Success

Here’s a simple formula. Four CFAs plus a five-step due diligence process equals solid performance for the money managers at TAMRO Capital Partners and their Aston/TAMRO Diversified Equity Fund (ATLVX). Sure, it relies on core investing principles like value, management and momentum, but it is so much more, as hyper-enthusiastic managers Philip Tasho and Tim Holland are happy to explain.

“We’re trying to identify companies with a strong core business, where they have built leading market share in their prospective product or service category,” Tasho says. “No. 2, they have an experienced, tenured management team. Lastly, we look for companies that have flexible financials and, importantly, we note how they allocate capital over a long period of time.”

All well and good, but the same could be said about a gazillion funds now in existence. How is this one different?

“We’re very opportunistic,” Holland says. “Our large-cap core fund can dip down the cap spectrum; so we’ve had small- and mid-cap exposure, which can be looked at as the large-cap leaders of tomorrow. The other thing that separates us is that while we’re very sensitive to evaluation and the price you pay, we also want to see companies with nice growth profiles. We reject as faulty the idea that managers, particularly an equity manager, should live strictly in a value box. We’re just looking for the next great investment idea, regardless of whether or not it falls along that classic value spectrum.”

Tasho started out “many moons ago” as a securities analyst in 1980. After 20 years on the investment side in the banking industry, he helped found Alexandria, Va.-based TAMRO Capital Partners.

“That was in June of 2000,” he reminisces. “We had $3 million when we started, and here we are today at $ 1.6 billion.”

Holland took a more circuitous route to his present position. The New Jersey native came from the PR world, specifically in investor relations whose clients were mainly capital market firms.

“After seven years of media relations, I found I was more interested in what my clients were doing for a living than what I was doing for them,” he explains. “So I took a chance and went to a small hedge fund, got my CFA and after five years decided to join TAMRO.”

He adds that although both he and Tasho are “CFA financial professionals,” they both have liberal arts backgrounds, which gives them more of a “creative bent that lends itself to good stock selection and the ability to put companies and markets in perspective when a lot of people can’t see the forest for the trees.”

The 16-person firm is 70% owned by employees, with Tasho the largest individual owner. But Tasho and his family are also the largest shareholders in the Diversified Equity Fund—significant “skin in the game” that is sure to get him high marks with Morningstar’s stewardship grades.

Now, about that five step process:

“It begins with a scoring system,” Holland says. “All we’re doing there is taking small-cap, mid-cap and large-cap stocks and scoring them on a combination of growth and value characteristics by industry. We’ll focus on companies that scored first or second percentile as potential investment ideas. We’re very much bottom-up fundamentally driven. But we use the scoring system as a great idea generator and focus tool for the folks at TAMRO.”