Glossary

Alpha
Definition - A measure of the extra return made over and above what the CAPM model predicts. According to the CAPM model, expected returns are a function of the risk-free rate, the portfolio's beta, and the market risk premium. Alpha, then, is the difference between your actual return and your expected return as measured by the CAPM equation.

At AmeriCap - A high alpha indicates that a manager is performing well on a risk-adjusted basis - the return per unit of "risk" (i.e. standard deviation) is higher. Our investment process is designed to generate alpha for our clients.

Beta
Definition - A measure of volatility relative to an index, usually the S&P 500. The higher the beta, the more volatile the stock or portfolio is compared to the index. In essence, it measures how strongly a stock or portfolio of stocks responds to broad market movements.

At AmeriCap - Growth stocks generally have higher beta coefficients than value stocks because of the market's expectation of those companies' growth. Because AmeriCap is a large-cap growth manager, the majority of its stocks in its portfolio have a beta relative to the S&P greater than one.

Bottom-up Investing
Definition - An investment style which emphasizes stock selection. This style of investing looks to identify companies based on their individual merits regardless of current economic condition.

At AmeriCap - We apply a bottom-up approach to our investment process. Regardless of the market environment, we believe there will always be good investment opportunities which can be found by applying a disciplined process to stock selection.

Due Diligence
Definition - The process of investigating an investment. By performing due diligence, the investor has performed research and analysis to provide higher confidence that the investment has the potential to provide solid returns.

At AmeriCap - Our process was created to perform due diligence on all of the potential investments that might be added to our final portfolio. We investigate companies by looking at their growth characteristics and their likelihood of sustaining that growth in order to determine if there is validity to the investment merits of a holding.

Fundamental Analysis
Definition - A method of stock evaluation which involves an analysis of the company's business characteristics, such as its financial condition, growth potential, profitability, and competitive position.

At AmeriCap - As part of our investment process and due diligence, our team performs fundamental analysis on potential investments for inclusion into our portfolio. During our analysis, our focus is on determining what the fundamental drivers of growth are to determine potential factors that are likely to appreciate the investment to its full potential.

Growth Style
Definition - This style of investing looks to identify stocks which are expected to grow based on strong revenues and earnings.

At AmeriCap - We believe that successful investments are characterized by strong revenue and earnings growth that are sustainable over time. Our process seeks to identify such companies by looking at historical, as well as expected growth criteria.

Market Capitalization
Definition - Calculated as the company's share price multiplied by its total shares outstanding. This is the total stock value of the company at any one point in time.

At AmeriCap - Throughout our process, we generally screen for companies which have over $5 billion in market cap. This classifies us as "large-cap" managers. Large-cap stocks are generally established, well known companies which are highly valued in the marketplace and offer high liquidity and less volatility compared to lower-cap stocks. Choosing large-cap growth stocks provides another level of risk control to our investment process for these very reasons.

Systematic Risk
Definition - This is the risk that is associated with the entire market. It cannot be diversified away, since economic and market conditions affect all stocks.

At AmeriCap - Because of our focus on highly liquid, large-cap stocks, we can fully diversify our portfolio to the point where we minimize unsystematic risk so that the primary risk that is left is systematic.

Unsystematic Risk
Definition - This is the company-specific risk that can be eliminated by proper diversification within a portfolio.

At AmeriCap - Our portfolios are fully diversified so as to significantly reduce the unsystematic risk associated with the growth companies we choose. We consider diversification a risk control measure important to our clients, and structure our portfolios as such.