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Neumeier Poma Investment Counsel, LLC

PRI reporting framework 2020

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

          Investment Process and Portfolio Creation
        

01.3. Indicate if the investment policy covers any of the following

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

Our philosophy is based on the belief that the coverage of small-cap value stocks by Wall Street's research machine is often inconsistent and/or incomplete.

Our investment strategy (process) exploits these inefficiencies, helping our portfolio management team find small cap stocks that are misunderstood, undervalued, or ignored by major Wall Street firms.

Beginning with a universe of approximately 2000 profitable companies with market capitalizations between $250 million and $3 billion, we apply multi-level tests to identify good businesses based on a variety of factors including financial strength, internal returns, cash flow generation and valuation.  Valuation and financial strength criteria typically eliminate 75% of the names with additional names being eliminated based on our research team's experience and knowledge. We want to buy stocks with a greater than 40% upside / 20% downside ratio. 

Our (bottom up stock picking) investment criteria:

  • Compelling high quality companies
  • Stock trades at a discount
  • Identifiable growth "catalysts"
  • Screen for positive environmental, social, governance (ESG) factors
  • Avoid investments in fossil fuels, firearms, private prisons, and unethical labor or lending practices

Our mandate is to preserve client capital by managing risk while also outperforming our value benchmarks and peer groups over a 5 year market cycle.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

01.6. Additional information [Optional].

          
        

SG 01 CC. Climate risk (Private)


SG 02. Publicly available RI policy or guidance documents

 

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

URL/Attachment

Other, specify (1) description

          Investment Process and Portfolio Creation
        

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

URL/Attachment

URL/Attachment

02.3. Additional information [Optional].

We are a small company with 8 full time employees.  We have 5 research analysts, including 3 portfolio managers (of which two are the owners) that look for investments.  The portfolio managers make the final investment decisions about buying, selling, or adding to a stock position.  The portfolio managers also make the decision about whether to engage with a business.  Engagements are done on a case by case basis as determined by the situation.  The portfolio managers will lead the team when engaging with an organization.  Active ownership and integrating climate change analysis into the stock picking decision is done by all research analysts but the final investment decisions are made by the portfolio managers.  Portfolio managers are aware of the investments being researched through weekly and monthly meetings.  One advantage of being a small investment firm is that the portfolio managers are knowledgeable about each investment during each step along the way.  


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Neumeier Poma Investment Counsel LLC ("Neumeier") is an investment adviser registered with the United States Securities and Exchange Commission (the "SEC"), under the Investment Advisers Act of 1940 (the "Advisers Act").

Clients invest with us knowing we invest exclusively in small-cap value stocks (portfolio 30-40 holdings).

Neumeier's Compliance Manual sets forth policies and procedures that are reasonably designed to prevent violations of the Advisers Act and SEC rules by Neumeier and its employees as envisioned by SEC rule 206(4)-7(a).

Neumeier enforces a written Code of Ethics to comply with SEC Rule 204A-1. Employees are to comply with applicable federal and state securities laws and regulations.

As a fiduciary to each client, Neumeier owes each client the same duty of loyalty. As a consequence, Neumeier cannot give one client or group of clients' preference over other clients.  Yet it is not always possible to execute all client transactions in the same security or other investments for all clients simultaneously.  Therefore, Neumeier has adopted Transaction Allocation Policies as part of its Client Transaction Policies and Procedures for allocating, in an equitable manner, transactions among its clients participating in a given transaction. Conflicts are generally dealt w/ on a case by case basis.

 

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within investee entities.

04.2. Describe your process on managing incidents

Risk management is critical in our objective to maximize alpha and control downside. Incidents (ESG included) that occur within portfolio companies that bring new information lead to a re-evaluation of the original investment premise. Sell discipline is applied on a case by case basis.


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