Strategy

Investment Process

• Growth At a Reasonable Price (GARP) – The Fund seeks growth companies in the technology, healthcare, specialty retailing, oil services, media, leisure, cable and entertainment industries with price-to-earnings ratios equal to or less than half the long-term growth rate of earnings per share. The Fund looks for appreciation over a 12–18 month period in the range of 25–50%.
• Top Down – The Fund focuses on macroeconomic trends worldwide and in the U.S., with emphasis on seminal changes in the new economy. The Fund looks for growth sectors within its discipline, analyzes the rotation between these sectors and looks for dominant companies within these sectors.
• Bottom Up – Based on the GARP investment strategy, the Fund looks for growth companies that are reasonably priced, focusing on those sectors within its discipline. The Fund then analyzes those companies that qualify, using a variety of quantitative tools and ratios. The Fund then visits these companies, their customers and competitors and, most importantly, focuses on the quality of management.

Investment Strategy

• Fundamental Research – Investment decisions at the Needham Growth Fund are based upon independent analysis of business fundamentals. The first level of analysis concerns industry prospects. Company-specific analysis includes company visits, discussions with management and employees, and interviews with customers and competitors.
• Leadership Quality – The Fund focuses, above all, on the quality of company leadership because of our belief that management is the most critical element in determining the success of a business. We choose to invest in people, not just in technology or products.

Investment Focus

• Long-Term Value – The Needham Growth Fund believes that short-term factors are poor indicators of the true value of a company. Good companies are often undervalued because of a disappointing quarter, undue general or industry-specific pessimism, institutions wishing to exit the stock in size, or a lack of knowledge and support for the stock. The Fund sees these as excellent buying opportunities. On the other hand, lower quality companies are often overvalued due to inordinate optimism about a new industry or technology, aggressive forecasts, investment banks promoting their clients, earnings spikes, momentum investors driving up prices, or accounting gimmicks. These overvalued situations represent short opportunities for the Fund because, in the long term, real underlying values do eventually come through.

Risk Management

• Hedging – The Needham Growth Fund selectively hedges its portfolio by buying and selling (writing) covered options against certain positions, and purchasing put options on industry indices according to the Fund's portfolio weightings. This strategy enables the Fund to protect its gains while significantly reducing downside risk and volatility during market corrections.