Investment Thesis
Why Microcaps?
Cadoc executes a high-conviction value strategy, built on three distinct pillars:
Structural Edge: Cadoc targets liquidity gaps where institutional capital cannot deploy without distorting prices, turning a small asset base into a tactical advantage.
Informational Edge: Cadoc generates proprietary insights through primary research (filings, site visits, management access, scuttlebutt) to be more informed than the competition.
Behavioural Edge: Cadoc arbitrages market short-termism through a multi-year investment horizon, allowing fundamental value to materialise while competitors react to daily volatility.
Stock Selection
Cadoc invests capital in the global microcap universe, companies worth roughly $10m to $500m, on the basis that they tend to be:
Overlooked. Thousands of analysts, millions of eyes and billions of dollars of computing power continuously set prices in the broader market. Those efficiency-creating resources are conspicuously absent from microcaps. A billion-dollar fund cannot own enough of a $50m company to move the needle, many mandates forbid the attempt, and most microcaps have little or no analyst coverage.
Cheap. Neglect keeps the buyer base thin, so prices can diverge from fundamentals and quality microcaps routinely trade at discounts. It is the one corner of the market where Fisher businesses can still be bought at Graham prices.
Idiosyncratic. Returns are driven heavily by what each business does rather than by where the index goes. It is easier to bet on companies than on economies.
Approach to Generate Alpha
Cadoc filters the universe through its QTA framework, looking for good companies on the path to becoming great, at prices that don't yet reflect it:
Quality: Best-in-class products or services in defensible and growing niches. Found early, while margins and returns on capital still sit below their steady state. Owner-operators with a record of intelligent capital allocation. Balance sheets that do not depend on capital markets.
Trajectory: Improving fundamentals and a step change in leading indicators, including contracts won, customers landed, capacity added, margins turning, most of which appears before the financials do. Price action confirming the market is beginning to notice.
Asymmetry: Valuations supported by net cash, tangible assets or current cash flow. Low multiples, in absolute terms or against peers. The bull case should include a lollapalooza driven by rising revenues, operating leverage and an expanding multiple together.