Richard Driehaus of the Driehaus Small Cap Fund and the Bull and Bear Partnership Fund
Market Wizards Index: +30%
Compound annual over 12 years
Fund or affiliation
Driehaus Small Cap Fund
Bull and Bear Partnership Fund
Driehaus Small Cap Fund- Focuses on Small Cap growth stocks which are under-covered by Wall Street. He uses a pick stocks based on fundamentals and momentum trade based on TA.
Bull and Bear Partnership Fund- Seeks to remove the impact of market trend by approximately balancing long and short stock positions on an ongoing basis.
Research Techniques Employed
Looks for earnings growth, and earnings acceleration. Different variations: accelerating sales and earnings; positive earnings surprises; sharp upward earnings revisions.
Learn of good growth stocks from friends, regional brokers, and staff-analyst who he sends to conferences.
Early recognition of new markets in new sectors before the numbers came through so powerfully, and before Wall Street starts to cover them. The stock usually don't have much "left brain" (micro) factors, growth rate, multiples, etc... Its just a "right brain" story.
Trading Techniques Employed
Direhaus always look for the best potential performance at the current time. "Even if I think that a stock I hold will go higher, if I believe another stock will do significantly better in the interim, Ill switch."
Driehaus employs TA when he trades. When a stock is dropping, he wont buy even he like the fundamentals. He needs to see some stability in price action before buying. Sometimes TA triggers sale of a current holding.
Risk Management Techniques Employed
People believe high portfolio turnover is risky. High turnover as a result of taking a series of small losses to avoid larger losses, in fact is less risky.
Philosophy and beliefs
Far more money is made buying high and selling at even higher prices. When he buys, hed like to see relative strength in top 10% of the market, or at least 20%.
Do what is right, not what is comfortable.
Typically, the more the street covers a stock, the less opportunity there is.
Market tend to confuse short-term volatility with long-term risk... they don't pay enough attention to l-t potential.
If there is a large move on significant news, either favorable or unfavorable, the stock will usually continue to move in that direction.
History and other facts
In 1984, started Richard Driehaus Foundation with $1M contribution of TCBY stocks. It distributes 5% annually to charities. By the end of 1991, the foundation had grown to $20M.
John Heralds America Fastest Growing Companies had a big impact on Driehaus investment philosophy. If a companys earnings were growing over a long period of time, its stock price had to go the same direction.
Nietzsche said, "What does not destroy me, makes me stronger."
Advised investors to develop their own philosophy based on his own independent research; so that he is able to hold on to his positions in really difficult times.
Spends a lot on technology to support his ideas flow and information flow.
Home Shopping Network 1986
US Surgical 1989
30% over 12 years: "For the 12 year period... Driehaus averaged... in excess of 30% (net of all fees)
Bull and Bear Partnership Fund returned 67% 1990 and 62% 1991 (before incentive fee). It had only 3 down months of less than 4%.