The North Star Process – Micro to Macro Investing
While our focus is on overlooked small- and micro-cap companies, the North Star Mutual Funds actively invest in undervalued companies of all sizes. When considering an investment, we look for opportunities that have the following three characteristics:
1. Statistically Undervalued
Statistically undervalued companies in which the stock trades at a discount to publicly available comparable information and to private market multiples. Our focus is on equities that have the potential to generate high levels of free cash flow and strong or improving balance sheets.
2. Simple Businesses
Simple businesses that we can understand and assess the risks inherent in the business model, product line, competition, and story. Our team meets with company management and does primary research prior to investing. We seek businesses with a niche product, a distinct competitive advantage, a well-respected brand name, high barriers to entry, and significant pricing power.
3. Solid, Improving Financials
Businesses that in our opinion have a high likelihood of a specific growth catalyst. Catalysts for improving business prospects that tend to characterize these businesses include new management, expanded markets, new products, and potentially beneficial new regulations. These businesses have a high likelihood of producing growth for the foreseeable future.
Mutual funds have investment risks including loss of principal. There is no guarantee the fund will meet its objective. In general, the price of a fixed income security falls when interest rates rise. There is a risk that issuers and counterparties will not make payments on securities and other investments held by the Fund, resulting in losses to the Fund.
The Fund may invest in high yield securities, also known as “junk bonds.” High yield securities provide greater income and opportunity for gain, but entail greater risk of loss of principal. Foreign common stocks and currency strategies will subject the Fund to currency trading risks that include market risk, credit risk and country risk. Municipal securities are subject to credit risk where a municipal security might not make interest and principal payments as they come due. The Adviser follows an investing style that favors value investments. At times when the value investing style is out of favor, the Fund may underperform other funds that use different investing styles.
Investments in lesser-known, small and medium capitalization companies may be more vulnerable than larger, more established organizations. As with any investment, there are risks associated with REITs. Investments in lesser-known, small and medium capitalization companies may be more vulnerable than larger, more established organizations. The Advisor does not attempt to keep the portfolio structure or fund performance consistent with any market index. Increased portfolio turnover may result in higher brokerage commissions, and other transaction costs may result in taxable capital gains.
Investors should carefully consider the investment objectives, risks, charges and expenses of the North Star Funds. No-load mutual funds are sold without sales charge; however, they have ongoing expenses, such as management fees. This and other important information about each of the Funds are contained in the prospectus, which can be obtained at www.nsinvestfunds.com or by calling (855) 580-0900. The prospectus should be read carefully before investing.