DRIEHAUS’S WIN­NING TECH­NIQUE

Finweek English Edition - - Creating wealth -

AN IN­TER­EST­ING FEA­TURE of Driehaus’s tech­nique of fo­cus­ing on shares with ex­cep­tional growth po­ten­tial is that he of­ten ends up with smaller com­pa­nies. It takes a lot of work to track them down, but since th­ese shares are of­ten ne­glected they can present ex­cep­tional op­por­tu­ni­ties.

A few as­pects of his tech­nique: • Be sure to de­velop a ba­sic phi­los­o­phy. If you don’t have that you won’t suc­ceed in stick­ing to your in­vest­ment plan in dif­fi­cult times. To make such a phi­los­o­phy part of your think­ing means you have to con­duct a con­sid­er­able amount of dig­ging your­self to find the po­ten­tial win­ners. Fo­cus on the growth po­ten­tial of earn­ings and then watch whether the price moves in line with that. There must be a har­mony be­tween price and earn­ings growth. Ac­cept that many of the best growth shares have a high price:earn­ings ra­tio and it’s there­fore psy­cho­log­i­cally dif­fi­cult to in­vest in them. Re­mem­ber that high rel­a­tive strength in­di­cates that other in­vestors are also pre­pared to pay a lot for the share. There are ad­van­tages in be­ing a long-term in­vestor. There­fore don’t al­low a sud­den bear mar­ket to dis­rupt your in­vest­ment plan. • When a share moves strongly (up or down) as a re­sult of im­por­tant news it will tend to move in that di­rec­tion for quite some time. Ex­ploit this phe­nom­e­non.

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