As featured in Emerging Manager Monthly
A lot has changed in 15 years, particularly for domestic small-cap value equity manager Neumeier Poma Investment Counsel. The firm, which closed its strategy to new investors 15 years ago, has had a busy year that has included a name change and a renewed marketing effort. The firm was founded in 1985 by Peter Neumeier and was recently renamed Neumeier Poma Investment Counsel to reflect the addition of Brian Poma as a partner in 2008. Poma, a co-portfolio manager with Neumeier on the small-cap value strategy, joined the firm in 2000 as an analyst and trader. Now boasting a 25-year track
record that has seen only two down years, the firm brought on third-party marketing firm Arrow Partners, led by Steve Rubenstein and Ken Rogers, to introduce the firm to the institutional marketplace. "It was more of a matter of Peter wanting to be ready to take on new money and the fact that he waited about 9-10 years for me to come along and go from being an analyst up to a co-portfolio manager," Poma said, adding that the firm also has a senior analyst that has been a part of the team for 12 years.
The firm currently has approximately $230 million in assets under management. "Before we hired Ken and Steve, we were pretty much off the grid," Poma said, noting that the firm had no Web site, was not in any databases and also recently became GIPS compliant. "We are starting to get some success. We’ve had some interest from consultants and sub-ad vised opportunities...we are starting to gain traction. We know it is going to take a little bit of time. With the help of Ken and Steve, we are actually starting to get on the map." The firm’s concentrated portfolio typically holds 35-40 names. "We are big believers of preservation of capital," Poma said, explaining that the firm looks for companies with low valuations on a relative and historic basis with low to no levels of debt. "We use a lot of caution when we pick our companies. We don’t like to lose money." The firm also looks for a catalyst with each firm, with a requirement of a minimum of 40-45% upside over a two-year period, he said. The four-member investment team meets twice a week to go through idea generation and decide which ideas to pursue further, with Neumeier and Poma making all final decisions on the portfolio.
The average length of time a position will remain in the portfolio is two-and-a-half to three years.
The strategy does not allow a specific sector to get over 20% of the portfolio and the firm typically takes an initial position of about 3%, with a maximum individual weighting of 7%.
"We have so much experience concentrating in this one area, and the fact that we pay so much attention to making sure that we are not overly aggressive and we are careful about the decisions
we make is reflective on the companies that we buy, I would say that is our biggest advantage. We always say the biggest mistakes we make here are because we are too cautious," Poma said. Poma said the strategy should be attractive to institutions looking to allocate to unique strategies. "I feel like we have a really good story and think we would be a good fit for particular accounts out there that are looking for a manager that has stock picker capability that doesn’t mimic the benchmark," he said. "The most surprising thing to me is it just takes time," Poma said. "It is a slow process, but we feel like we have a good product, it is just a matter of getting our name out, getting on their radar. To me, it is not a matter of if it happens, it is a matter of when."