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Mid Caps Are Where the Action Is

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You hear most investors talking about the security of large caps or the growth potential of small caps in an inflationary environment, but you rarely hear people gush about mid caps -- and that's great.

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The fund has an average turnover somewhere around the 100% level over time. When we're evaluating a stock, we're usually looking at a 12- to 18-month horizon and trying to make estimation of what the stock could do over that time. The actual holding period can be much shorter or much longer than that, but that's the time horizon we're focusing on when we make new buys.

Gregg Early: Do you have any that are eye-catching, especially these days?

Brian Lazorishak: Well, what's the old saying? Love all of our children equally? I think we tend to like all the names in the portfolio; that's why we own them. Not necessarily as favorites, but I think there are a few names that really highlight kind of the way we look at the world in terms of our investment process.

One of those is a company called Polaris Industries (NYSE:PII). Polaris is a power sports vehicle provider and manufacturer. Polaris makes off-road vehicles, although it actually got its start in snowmobiles; that's a relatively small part of their business now.

What we like about this company is it's been a very consistent growth story. It just grows earnings year after year at about a 20% rate. This year, they've accelerated that earnings growth somewhat, so they're going to grow earnings in excess of 30% this year.

Because of new product innovation, because of just dominant market position in some of their key areas, they continue to have a strong outlook. For that 20% growth, you're paying less than the growth rate in terms of the forward P/E. It's about 18 times forward earnings.

Any time we can get a company for a P/E of less than the growth rate, that's pretty attractive...if we think that growth rate is going to continue.


Editor's Note: This article was written by Brian Lazorishak of MoneyShow.

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No positions in stocks mentioned.
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