Ellis Charles Smith

MSIM pursues a value based investment philosophy based on the belief that superior equity investments are those whose current market valuations do not reflect adequately the present or future operating potential of the underlying business. They believe that mid- and small-cap companies represent ground that is more fertile because they generally receive less Wall Street attention. The firm's non-linear investment identification process and their fundamental research have 8 phases, all of which are executed for every company on the firm's buy and candidate lists. These phases are: idea generation, 'incubation' period on candidate list or elimination from consideration, fundamental balance sheet and accounting analysis, identification of a niche product or process to drive earnings, contact with company management, competitors and suppliers, strategic analysis to assess market, industry, company and portfolio risk, analysis of liquidity/trading patterns and position on buy list for purchase across all relevant strategy portfolios. A number of proprietary screens are used. Examples of screening criteria are price movement, price-to-book, limited institutional ownership, limited Wall Street coverage and positive cash flow. MSIM portfolios are managed on a team basis and formal committee meetings are held weekly or more often when warranted. Additionally, committee members interact daily, digesting, analyzing and discussing market and company specific information. When a company gains a position on the buy list, all committee members' radar is alerted with regard to direct or inferential information that might affect the company's business or its stock performance. Once an investment decision has been made by the committee, a specific price or price range is established based on internally developed models/forecasts. Having identified a good business and reached a consensus on its merits, the firm has the patience to wait for their price, and constantly monitor the balance or risk and reward relative to industry, market and economic conditions. MSIM's sell discipline includes both absolute and relative measurements. Holdings are trimmed, reevaluated or sold as they approach or reach their target price. In addition, holdings may be sold (or reduced) should they become overvalued in relation to their peers. Positions may be sold in order to accommodate a new investment if the investment committee believes the new investment has greater potential. Finally, stocks are sold when a company fails to meet the firm's investment expectations, the initial investment thesis has changed or there are unanticipated negative events, including management credibility issues.

Functions as a College/University