At Moody Aldrich Partners (MAP), our primary guiding principle is the concept of value - buying companies when their shares are misunderstood or inappropriately appraised by the marketplace. History and academic studies support our belief that value investing offers the most advantageous balance between risk and reward. Using conventional definitions, a MAP study beginning in 1970 found that an index of value stocks grew by a compound annual rate of return of 13.2% through the end of 2006 compared to just 9.3% for an index of growth stocks. These superior returns were achieved at lower risk levels.

At MAP, we go beyond conventional measures of value that point to statistical cheapness and identify misunderstood companies where disconnects exist between price and value. Our responsibility is to position client portfolios to benefit when the market naturally corrects these inefficiencies. Experience has shown that some of the most misunderstood and undervalued ideas can be found among small and mid sized companies and certain special situations experiencing positive change. We also find opportunity among neglected, out-of-favor stocks whose prices exhibit low expectations. When those expectations prove to be overly pessimistic these companies provide good downside protection and high return potential. Conversely, prices for broadly popular stocks often are supported by high expectations creating vulnerability when those expectations prove too ambitious.

We focus our company specific research on opportunities that are mis-priced then we consider investment timeliness. Inherent in value investing is an element of time risk. We have found that applying earnings estimate momentum to the selection and sale of value stocks can reduce time risk, help avoid value traps, and enhance returns.