Q:  What would you do if the bestranking stocks in your system do not meet your criteria on the fundamental level?

A: We try not to invest in companies that have too much debt burden. An example would be airline stocks. A lot of airline stocks have been ranked well lately. The majority of them have high fixed costs; high debt levels and high energy prices definitely weigh on them. In addition, the threat of terrorist acts could really cripple the airline industry. With the high levels of consumer debt and a slowing economy, people will be traveling less. There are just too many economic variables that can devastate that industry, so I avoid it regardless of the rankings.

Q:  Do you look for certain levels of debt to equity?

A: Yes, we try to avoid excessive debt but some debt is fine. Presently, our long-term debt to equity ratio is 51% and that’s right about the top of the range that we like.

Q:  Would you explain your portfolio construction principles?

A: We run a diversified portfolio and we have limited the exposure to any single issue to 5% of the portfolio to control risk. ADRs of foreign companies are also included in our model so it doesn’t matter if the company happens to be offshore. T

We currently hold about seventy names. Typically the fund is invested in 70 to 100 names. The size of the fund right now is just under $7 million. The turnover is 76%, which is lower than the turnover of the other Bjurman funds. The fund has a 5% maximum cash exposure but we typically hold between 1% and 2% cash. We like to be fully invested but also we like to keep some cash on hand to meet unperceived redemptions.

Q:  Do you use any benchmark to measure your performance against?

A: Yes, the Russell Mid-Cap Growth index, which consists of about 537 stocks. The average market cap of our portfolio is $4 billion versus $5.3 for the Russell Mid-Cap Growth. The forward P/E for our portfolio is 17.74 versus 21.5 for the index, while the EPS growth last year was 89.36 versus 42.08 for index. The forecasted EPS growth is 18.3 but by the nature of our models, that number should be conservative. Next year when you look back at the past year’s growth, it should be substantially higher than the forecasted growth.

Q:  What’s your approach towards risk control?

A: We control risk mainly through diversification and by limiting the percentage we have in any one issue. Also, our weekly watch list helps us to red-flag and monitor our portfolio.