Once macro investment theses are established, Leeb Capital Management performs detailed fundamental, “bottom up” analysis on leading companies in those sectors it believes will grow faster than the overall market.  The Leeb Focus Fund invests primarily in large capitalization equity securities. Rather than just mirroring the market, the Fund focuses on finding stocks that appear capable of sustaining high growth rates and that are selling at attractive prices relative to their potential for growth. The Advisor utilizes the S&P 500 as its investment universe, and supplements it with other companies that may fit the firm’s investment criteria but are not included in the index.

Fundamental Research

The Advisor performs fundamental analysis to find stocks within each sector that meet the following criteria: 

• Strong Growth The Fund seeks to invest in stocks of companies that the Advisor projects will have three- to five-year growth rates in excess of the average of the market and/or the companies’ respective sectors.

• Competitive Edge The Fund seeks to invest in companies with a competitive edge, either because they are market leaders, and/or they have dominant positions within their industries. The Advisor believes these companies generally offer greater predictability of sales, future earnings and growth rates and that they offer the potential for more stable and consistent returns.

• Undervalued Opportunities The Advisor looks for stocks selling at an attractive price, which the Advisor defines as those stocks that have a price to earnings divided by estimated growth (PEG) ratio that is less than the market’s. The Advisor believes that a relatively low PEG ratio indicates that a company’s growth prospects are not fully reflected in the stock’s current price and, thus, the stock is selling at a discount to its true value and prospects. In addition to seeking growth companies at a reasonable price, the Advisor also looks for companies with proven management and sound financial statements.

• Diversification The Fund will diversify its portfolio across the market sectors selected by the Advisor. The Fund may diversify into sectors that potentially offer some protection when inflation, deflation or other circumstances adverse to the market arise. 

The Advisor will focus on its best ideas, which means that the Fund may invest in a portfolio of as few as 25 stocks. As described above, however, the Advisor will attempt to diversify the Fund’s investments in common stocks issued by U.S. and foreign large-capitalization companies among several market sectors, directly or through exchange-traded funds that invest in such securities. The Advisor considers large-capitalization companies to be those with market capitalizations of at least $8 billion. The Fund typically will invest in foreign companies through the use of depositary receipts such as American Depositary Receipts, which are receipts issued by U.S. banks for shares of a foreign corporation that entitle the holder to dividends and capital gains on the underlying security. 

From time to time, the Fund may invest up to 20% of its assets in small- and mid-capitalization companies if the Advisor’s research indicates that the companies represent true leaders in their market sectors and satisfy the Advisor’s other investment criteria. 

The majority of the Advisor’s research is generated in-house, while the remaining portion comes from outside sources such as other investment firms. All of these sources help to augment the Advisor’s research efforts and to assist portfolio managers in arriving at earnings and growth estimates and expectations. 

Sell Discipline 

There are three main conditions under which the Advisor typically sells securities:

• If the Advisor foresees a major change in the economic environment, such as the start of a new trend in interest rates or inflation, that warrants a different asset mix.

• If a security fails to live up to the Advisor’s expectations.

• If a security meets the Advisor’s performance expectations (or the Advisor determines that further upside potential is limited). 

Small-cap and mid-cap investing involve greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidty and increased competitive threat. 

The S&P 500 Index is a widely recognized unmanaged index of equity prices and are representative of a broader market and range of securities than is found in the Fund’s portfolio. The Index returns do not reflect the deduction of expenses, which have been deducted from the Fund’s returns. The Index return assumes reinvestment of all distributions and does not reflect the deduction of taxes and fees. Individuals cannot invest directly in the Index, however, an individual can invest in exchange traded funds or other investment vehicles that attempt to track the performance of a benchmark index. 

Diversification does not ensure a profit or guarantee against loss.