Our Strategy

Our Strategy

Our concentrated micro-cap strategy invests in 10 – 15 publicly-traded U.S. companies with market capitalizations under $1 billion. Why? Because research suggests that micro-caps tend to earn higher returns over the long-term as well as provide greater opportunity to generate alpha. Micro-cap stocks can often be inefficient because there are generally fewer, less sophisticated investors paying attention to them.

In addition, concentrated portfolios tend to amplify a manager’s stock-picking ability. That is, if a manager is a good-stock picker, a concentrated portfolio should outperform a more diversified portfolio and vice versa. So, we think concentration makes sense for managers who are good at what they do. Concentrated portfolios also allow you to gain a deep understanding of the businesses you own since there are fewer of them. And it’s this combination of deep knowledge in an inefficient space that is our secret sauce.

And we think our strategy is unique because most micro-cap funds are more diversified and typically hold anywhere from 70 to 150 positions. But why would you want to invest in your 100th best idea? The fact is, a lot of money managers are too large for a concentrated micro-cap strategy. The math simply doesn’t work out. And many smaller investors aren’t comfortable with concentrated portfolios because they aren’t confident in their abilities. And for good reason. According to the S&P Dow Jones, nearly 84% of all stock funds underperformed their benchmark over a five-year period. And that number jumps to 90% after ten-years. But we think our background, investment experience, and research process give us a unique perspective on investing and allow us to analyze stocks more effectively than most. And so far our track record backs that up.