Investment Thesis
Why microcaps?
We execute a high-conviction value strategy, built on three distinct pillars:
Structural Edge: We target liquidity gaps where institutional capital cannot effectively deploy without distorting prices, turning our small asset base into a tactical advantage.
Informational Edge: We generate proprietary insights through primary research (filings, site visits, management access) to be more informed than our competition (retail investors).
Behavioural Edge: We arbitrage market short-termism through a 3–5 year investment horizon, allowing fundamental value to materialise while competitors react to daily volatility.
Stock selection criteria
We target the global micro-cap universe ($10m–$500m) because it offers a structural advantage that large-cap markets cannot replicate:
Microcaps are Cheap: While passive flows have driven large-cap multiples to historic highs, micro-caps trade at multi-decade discounts. The S&P 600 Small Cap Index trades at just 16x earnings compared to 24x for the S&P 500, a discount of nearly 40%.
Pricing Inefficiencies: The absence of coverage and institutional capital creates an information vacuum. Valuations often detach from reality, allowing diligent researchers to arbitrage the gap.
Idiosyncratic Alpha: Returns driven by specific business outcomes rather than market beta.
Approach to generate alpha
We filter the universe for asymmetric bets using a proprietary five-point framework:
Monopoly: We seek "local monopolies", companies that dominate a specific niche with a robust product or service that is critical to their customers.
Management: We demand high insider alignment ("skin in the game"), a demonstrated track record of intelligent capital allocation and customer-centric thinking.
Momentum: We require traction in both fundamentals (e.g. revenue inflexion) and price action to validate the thesis and that the market is beginning to recognise the company's worth.
Margin of Safety: We protect the downside by buying at valuations that price in a "failure scenario," effectively paying for the floor while getting the growth ceiling for free.
Material Upside: We target asymmetric payoffs where rising revenues, operating leverage, and multiple expansion offer a plausible path to double the valuation within twelve months.