Oberweis Micro-Cap Fund (OBMCX) The Micro-Cap Fund, under normal circumstances, invests at least 80% of its net assets in the securities of very small companies with a market capitalization of $400 million or less at the time of the investment which meet the Oberweis Octagon investment criteria. This is an effort to capture the exceptional growth potential of emerging companies in the earliest and most dynamic phase of their development.

Oberweis Asset Management, Inc. (“OAM”) focuses on investing in small-capitalization, emerging growth stocks. We specialize in finding profitable, rapidly growing companies. To identify and invest in these companies, we apply a set of eight investment criteria that together make up what we call the Oberweis Octagon.

The Oberweis Octagon allows us to discern those companies that are experiencing superior growth, and have the potential to continue to do so. It also helps us to buy these companies at reasonably attractive prices — valuations that don’t yet fully reflect their earnings potential. This Octagon strategy, in short, combines the best features of both the growth and value investment styles.

By helping us to avoid overpaying for stocks, while still allowing us to purchase stocks with solid growth potential, this approach can help to manage the volatility associated with investing in small-capitalization stocks.

We use eight factors when researching stocks for The Oberweis Funds:

Here’s a closer look at how we apply these guidelines when selecting stocks:

Rapid Revenue Growth - Extraordinarily rapid growth in revenue. OAM prefers this to be generated from internal growth as opposed to acquisitions of other businesses. At least 30% growth in revenues in the latest quarter for companies in the Micro-Cap and Emerging Growth Funds.

Rapid Earnings Growth - Extraordinarily rapid growth in pre-tax income. At least 30% growth in pre-tax income in the latest quarter for companies in the Micro-Cap and Emerging Growth Funds. There should also be rapid growth in earnings per share.

Low Stock Price Relative to Earnings - There should be a reasonable price/earnings ratio in relation to the company's underlying growth rate. In order to be considered for investment, companies in the Micro-Cap and Emerging Growth Funds must generally have a price/earnings ratio not more than one-half of the company's growth rate.

Innovative Products or Services - We’re not looking for one-hit wonders. We focus on companies with products or services that offer the opportunity for substantial, enduring growth. Ideally, we look for high barriers to entry for potential competitors.

Accelerating Profitability - Companies that are beginning to grow their earnings more quickly are especially desirable to us. Their stocks can rise significantly, as investors are willing to pay more for faster rates of growth.

Low Price/Sales Ratios - We consider a company’s stock price relative to its annual sales (its price/sales ratio). If this figure compares favorably with others within the same industry, the stock is an investment candidate.

Scrutinize the Balance Sheets - We carefully review a company’s financial statements, paying particular attention to footnotes. Our goal is to identify unusual items that may indicate future trouble.

Believe the Tape - We look for undiscovered stocks, but don’t try to fight the market. We typically buy stocks that have outperformed at least 75% of their peers in the market over the preceding year.

In international markets, the Oberweis Octagon is sometimes adjusted to meet the unique characteristics of the local economies and stock markets in which we are conducting our research. While such adjustments may be necessary, the philosophical spirit of the Oberweis Octagon remains intact in the stocks we select abroad.