Grounded in Asness et al. (2018) "Size Matters, If You Control Your Junk" and Chen, Noronha, & Singal (2006). Eliminates the ~1.8% annual Russell reconstitution front-running loss and weeds out unprofitable zombies.

S&P 600 rule: 4 quarters positive GAAP Net Income + positive Free Cash Flow + ROIC > 10% + top quintile 12-month relative momentum. Target portfolio of 25 to 30 concentrated compounders.

When a holding grows into a large cap ($20B, $50B, $100B+), it is never sold for size reasons. Bessembinder (2018) showed that 4% of stocks generate all net market wealth; multi-baggers ride indefinitely.

Positions are only liquidated if fundamentals break: trailing 12-month net income turns negative, 2 consecutive quarters of negative cash flow, or debt leverage spikes. Rebalances quarterly following SEC 10-Q deadlines.