Nicholas II, Inc. strives to increase the value of your investment over the long-term (“long-term growth”) by investing in a diversified portfolio of small- and mid-sized companies. The Fund looks for established companies with the potential for superior sales and earnings growth that are positioned to benefit from emerging, long-term social and economic trends. Our goal is to find what we believe are great companies and hold them for the long-term.
Investment Policies & Considerations
Nicholas II's management team believes that company selection is a key to providing superior returns over time. Our goal is to find companies that have the potential for outstanding earnings and sales growth, and are positioned to benefit from long-term economic and social trends. Some of the factors we consider in assessing companies include:
- Growth rate of 12% or better
- High return on capital
- Strong cash flow
- Consistent earnings
- Return on equity (ROE) of 15%, or an improving ROE
- Debt to total capitalization of less than 50%
- A price-to-earnings ratio lower than two times the growth rate
- An enduring franchise or brand
- Honest, capable management
- Significant management ownership of stock
- Long-term and short-term business momentum
It is our strong conviction that superior long-term results are achieved by minimizing capital losses in adverse markets. We do not attempt to forecast short-term market swings, but work to preserve gains and minimize losses using long-term, fundamental valuation techniques. Our portfolio turnover is moderate as our goal is to find, and hold, stock in great companies. However, if a stock is not meeting our expectations, or has become over-valued, we will sell it.
At Nicholas, our watchword is patience. We believe it is a key to superior long-term results.
Mutual fund investing involves risk; loss of principal is possible. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility.