We Look For:
Undervalued Growth Companies
Better Than Expected Earnings Over The Next 2-4 Years
Companies Undergoing Fundamental Change
We Pride Ourselves On:
“Kick-the-Tires” Research – Asking Tough Questions
Meeting With The Managements Before Investing
Keeping The Portfolio Fresh By Challenging Our Existing Positions
At Tanaka Capital Management, our clients’ assets are as important to us as if they were our own. Portfolios are adjusted to reflect the changing needs of each client, as well as for anticipated changes in the stock and bond markets.
Our investment philosophy reflects the view that at any one point in time there are industries and companies that are misunderstood in the marketplace. It is our job to find those that are under-valued relative to current profitability and future earnings growth and establish investment positions in those companies for our clients.
Our process represents a blend of “top-down” macroeconomic work and “bottoms-up” individual stock selection. Our macroeconomic analysis includes input from outside economists as well as our own proprietary work – particularly in the areas of demographics, inflation and productivity.
Our stock selection process starts with industries that will benefit disproportionately from fundamental change – for example, the aging of the Baby Boomers, the expanding need for better and lower cost healthcare, the increasing importance of productivity gains, the need for energy and raw material independence, and accelerating growth in demand for mobile communications, computing and entertainment. Individual companies must be able to generate real sales and earnings growth, with a focus on the next 2-3 years. This time horizon differs from many other institutional investors who focus on the next one or two quarters.
In over 30 years of investing, we have found the best investment opportunities in companies where we can meet with management so that we can ask tough questions about their own threats and opportunities, both short and long term. We have found this validation process to be most critical to our success over the years. This would include our “kick the tires” research – meeting one-on-one with company managements – as well as “shopping” the product or service as a consumer.
By our engaging in the “dynamic questioning” process, we are doing what most of our clients would like to do, but don’t have the time to do. Many do not have access to company managements to be able to ask about past problems, the changing competitive landscape or the potential incremental profitability from new products.