Investment Strategy










Investment Strategy

The Adviser believes that superior investment results can be derived by uncovering opportunities at the individual stock level. As bottom up fundamental investors, the Adviser’s goal is to generate return through stock selection rather than sector or market based themes. This proactive approach helps the Adviser to uncover fundamental change in companies that may be overlooked or misperceived by Wall Street.

The Adviser’s frequent interactions with customers, competitors and suppliers of existing and potential holdings produce a continuous flow of information that helps them to see beyond a set of financial statements and into a company’s true growth potential. The Adviser targets companies whose prospects are driven by internal factors and, as much as possible, little affected by the external environment.

The Adviser incorporates the collected information with an analysis of a company's earnings growth potential, relative valuation, strength of balance sheet, and sensitivity to macroeconomic factors and compares their outlook with Wall Street's expectations.

The Fund seeks capital appreciation through investments in a broad range of small and medium sized companies. The strategy is intended to maximize the benefit of stock selection ability while avoiding the potential volatility often associated with sector concentration. It is an active, small to mid cap strategy with a growth bias and a valuation discipline.

Buy Discipline

We seek companies that:

  • are experiencing a rapid growth rate - companies in our portfolio are typically forecasted to grow their profits in excess of 15% annually;
  • are selling at a stock price not yet fully reflective of their growth rate;
  • are undergoing a positive change created by new products, managements, distribution strategies or manufacturing technologies;
  • have a strong balance sheet; and are less susceptible to macro economic change.

Portfolio Construction

We build all of our sector and industry exposures from the bottom up, based on individual company analysis. We manage our exposure risks from the top down. In the context of risk management, we consider 20% the typical upper end of an industry weight. At the sector level, we typically use +/- 10% from benchmark universe weightings as a monitoring tool. We will typically practice forced displacement within a particular sector as it approaches our upper limits. We control stock specific risk by typically limiting positions to 1-3% of the portfolio’s value at initial purchase and generally pare them back as they approach 5% at market prices. We are also highly cognizant of the risks associated with sudden swings in investor sentiment, and constantly monitor possible scenarios in that regard.

Sell Discipline

Due to our desire to be invested in companies with strong potential for appreciation, we maintain a harsh selling discipline.

An investment position is liquidated for the following reasons:

  • forced displacement by a better idea
  • realization of our price objective
  • disparity between Wall Street expectations and what we perceive to be reality
  • deteriorating fundamentals

Distinguishing Features

  • Bottom up stock picking approach avoids theme-based investments, market timing, and sector rotation.
  • Analysts are generalists working across multiple industries, sectors, and throughout the market cap spectrum in order to maximize our ability to exploit stock specific opportunities.
  • Over 9,000 conversations each year including over 2,000 face-to-face management meetings with companies and their customers, competitors and suppliers
  • Networked library of in-house research allows incremental information to be shared across the organization in real time.

Principal Risks of Investing in the Fund

An investment in the Chesapeake Family of Funds is subject to investment risks, including the possible loss of the principal amount invested and there can be no assurance that the Fund will be successful in meeting its objective. The prospectus for each Fund provides a detailed description of the principal risks of investing in the Fund. Some of the risks are summarized below.

  • To the extent that the majority of the Funds' portfolios consist of common stocks, it is expected that the Funds' net asset values will be subject to greater price fluctuation than a portfolio containing mostly fixed income securities.
  • The Funds' performance will change daily based on many factors inherent in the securities markets including fluctuation in interest rates, the quality of instruments in the Funds' investment portfolios, national and international economic conditions and general market conditions.
  • To the extent that the Funds may invest a significant portion of their assets in the equity securities of small and medium capitalization companies, the Funds may involve a greater degree of risk than an investment in other mutual funds that seek capital growth by investing in more established, larger companies.

 

 

Gardner Lewis Asset Management serves as the investment adviser to the Chesapeake Funds. Chesapeake Funds are offered by prospectus only to U.S. individual and institutional investors. An investor should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the Fund. A copy of the prospectus is available by calling the Fund directly at (800) 430-3863 or the Fund’s adviser at (610) 558-2800. The prospectus should be read carefully before investing.

The Chesapeake Funds are not available for sale in all states. The information presented on this page is not an offer to sell or a solicitation of an offer to purchase shares of the fund.
Underwriter and Distributor
Ultimus Fund Distributors, LLC
225 Pictoria Drive, Suite 450
Cincinnati, OH 45246
Phone (800) 430-3863

 
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