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Exit Know-How: Why Minnesota's $10.5M Growth Fund Beat the R2K

The fund's tactics must be working. In 2007, the group beat their benchmark , the Russell 2000 by 7.1% after fees (17.2% vs. the Russel 2000's 10.1%). Performance-wise, the fund is in the top quartile of all small-cap growth mutual funds.

Now a month or so into 2008, these student money-runners are continuing to keep distance between themselves and their benchmark.

Exit Know-How

Knowing when to get rid of a stock can be just as important as knowing which stock to buy. In the Carlson Growth Fund, discounted cash flow models are king when it comes to selling out a position. When a stock isn't supporting its "buy models" anymore, it's probably time to call it quits.

Here are the stocks (along with the fund's returns) that the fund has dropped since May 2007.

University of Minnesota's Carlson Growth Fund Class of 2008 Position Eliminations
Company Ticker Symbol Purchase
Date
Sale
Date
Per Share Sale
Price
Return (%)
Over Ownership
Period
The Fund's Rationale for Selling
A.S.V. (ASVI) 5/4/1998 5/1/2007 $15.03 31% Housing starts were declining; general concerns about construction spending
OraSure Technologies (OSUR) 4/8/2002 5/1/2007 $7.23 6% Consistent poor performer; HIV test never took off
Kyphon KYPH 4/27/2006 8/1/2007 $65.21 46% Acquired by Medtronic (MDT)
Shuffle Master (SHFL) 1/30/2001 9/13/2007 $13.88 5% Company model seems broken; bad acquisition; needs new management
Ceradyne (CRDN) 4/27/2005 11/13/2007 $51.13 35% Concerns about military spending; new armored vehicle product had stiff competition
Ambassadors Group (EPAX) 12/12/2006 1/29/2008 $17.22 -23% Few catalysts to propel share price higher within the next year
Notes: The class of 2008 took control of the portfolio from the previous class on 5/1/2007. According to the current fund managers, many of these positions were traded several times over the years. All of these buy/sell decisions were grounded in the DCF method of valuation . The total return is based on the total profit/loss over the ownership period divided by total cost.

Jonas Elmerraji is the founder and publisher of Growfolio.com, an online business magazine for young investors.
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