This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Burrowing Deep for Health Care and Tech Bargains

When Lanny Thorndike researches potential investments, he burrows so deeply into the company that he could probably tell you how the Southeast sales director takes his coffee.

The co-manager of the $27 million-in-assets (CSMVX) Century Small-Cap Select fund hunts for companies with earnings growth above their peers but with stock prices cheaper than their peers. Sure, everybody wants those companies. But for Thorndike and his team, the difference is the process: a methodical, in-depth analysis of the company's profitability, growth and valuation prospects. The process also includes talking with second-tier managers, competitors and vendors to make sure the company passes muster.

If this all sounds time-consuming, it is. But it's hard to argue with the results: The fund, first offered to individuals in early 2000, has returned an average annualized 14.86% a year for the past three years. Century Small-Cap Select ranks No. 1 among all small-cap growth funds over one- and three-year periods.

In this week's 10 Questions, Thorndike discusses his investing process and the companies it unearths. He counts several health care companies among his favorites, is lightening up on financials and is starting to find some compelling tech stocks. Which ones? Read on.

1. How have you managed to turn in the performance you have during these past few years?

Blind luck. (Laughs.)

No. I'm not sure I can attribute it to any one thing other than we spend a lot of time on balance-sheet investing -- looking at return on equity and growth in book value. Those are two metrics that we focus on more than other investors. If companies can't deliver above 15% return on equity over rolling three-year periods, those generally aren't the stories that interest us.

If we can see companies that can grow book value over five-year periods, if they are mostly growing through acquisitions it's very hard to do. We adhere to a couple of metrics that most other people don't really pay attention to. We focus on how you can return an investment on the money that shareholders give companies, which, at the end of the day, is what your shareholder equity number is.

1 of 7

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,584.33 +227.46 1.31%
S&P 500 2,043.49 +30.60 1.52%
NASDAQ 4,716.9290 +72.6170 1.56%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs