Large Cap Research
Large cap companies (and larger midcap companies) tend to be dominant in an industry and typically enjoy certain competitive advantages due to their size. We look for large cap companies with a durable competitive advantage in a growing industry that we can buy for a reasonable price. Our large cap investments tend to be positions that we buy and hold for the long term as opposed to trading opportunities that are more prevalent in smaller capitalization stocks. We source investment opportunities in large cap stocks from several of the top performing investment managers in the world.
Smidcap equities combine many of the attractive qualities of small companies (underflowed, deep value) with some of the more established attributes of larger companies (more liquidity, stronger cash flows, experienced management). We look for smidcap stocks in an industry we understand that have the potential to grow into large cap companies. We look for exceptional management with a proven track record of innovation and execution and a strategy that we understand and agree with. We prefer companies with a large addressable market and a scalable business model. We look for smidcap companies with a product or service whose competitive advantages increase as it becomes more widely adopted.
Microcap equities are often ignored by large institutional investors on Wall Street due to their lack of liquidity and the resulting inability to have a meaningful impact on a manager’s overall investment returns. As a manager’s assets grow, it makes less economic sense to spend their time researching microcap stocks and they typically move on to larger, more liquid companies. As a result, the microcap arena tends to be the least efficient area of the stock market. We look for microcap stocks in an industry that we understand that trade at deep value prices based on standard valuation metrics and have a catalyst that can drive the stock price higher within the next 12-18 months.