James Oberweis

James Oberweis

James W. Oberweis is President of Oberweis Asset Management, Inc. and oversees all investment research at OAM. He received his BSc in Computer Science from the University of Illinois before earning his MBA with honours from the University of Chicago.

He has been a featured guest on CNBC and Bloomberg television, and writes a growth stock column for Forbes. He is a member of the Young Presidents Organization (YPO), the Economic Club of Chicago, the CFA Society of Chicago and the CFA Institute.

Summary

The Oberweis Octagon

Oberweis Asset Management selects its stocks based on what it calls the Oberweis Octagon: a set of eight criteria used to research stocks. These metrics help investors to identify companies that are going through above-average growth and will, ideally, continue to do so.

Using AGARP (aggressive growth at a reasonable price), the Oberweis approach seeks out rapidly growing companies at attractive prices. Guiding this process are eight points that make up the Oberweis Octagon: 

  1. Rapid annual growth in revenue (sales)
  2. Rapid annual growth in pre-tax income
  3. Reasonable (low) price-earnings (P/E) ratio in relation to underlying growth rate
  4. Products or services that offer the potential for strong future growth
  5. Favourable recent (quarterly) trends in revenue and earnings growth, ideally showing acceleration
  6. Reasonable (low) price-sales (P/S) ratio
  7. Review of company financial statements, especially the footnotes, to identify future problems
  8. Strong price strength relative to the market (high relative strength)

The Oberweis approach begins by limiting the universe of stocks to micro, small and mid-cap companies. By focusing on smaller companies, Oberweis attempts to find companies with a greater potential for high growth. No company can sustain a high growth rate indefinitely – eventually its size begins to weigh it down, making it less interesting to investors.

Rapid and consistent growth, specifically in revenues and earnings, is the cornerstone of the Oberweis Octagon.

Success Formula Octagon - Medium market cap

  1. MktCapM is between US$ 1 billion and US$ 8 billion (basis year 2015) adjusted backwards
  2. T12M EPS growth rate % over last 4 quarters >= 20
  3. T12M Pre-Tax Income growth rate % over last 4 quarters >= 20
  4. T12M Sales Growth Rate % over last 4 quarters >= 20
  5. Latest P/E ratio < estimated EPS growth % over next year
  6. Take the top 150 stocks with the lowest latest P/E ratio

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Success Formula Octagon - Small market cap

  1. MktCapM is <= US$ 1 billion (basis year 2015) adjusted backwards
  2. T12M EPS growth rate % over last 4 quarters >= 30
  3. T12M Pre-Tax Income growth rate % over last 4 quarters >= 30
  4. T12M Sales Growth Rate % over last 4 quarters >= 30
  5. Latest P/E ratio < estimated EPS growth % over next year * 0.5
  6. Take the top 150 stocks with the lowest latest P/E ratio

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

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