The THB Micro Cap strategy seeks long term capital appreciation over full market cycles by using a disciplined, valuation-based approach. Our strategy typically holds 100-125 securities from the approximately 1,500 stocks within the Russell Microcap® Index and will have a high active share.
Philosophy & Process:
THB believes that micro cap companies are inefficient and that a focused portfolio of high-quality securities can offer strong risk-adjusted returns.
We focus on finding companies that have demonstrated a long-term track record of success as measured by their ability to achieve self-funded growth. THB believes growth in revenue, shareholder equity and cash flow should not be achieved at the expense of rising levels of shares outstanding and/or debt.
Stocks must first pass THB’s stringent rejection criteria before being considered for the portfolio. THB’s proprietary Risk Grading and Quality Assessment, company-specific debt levels, retained earnings and earnings consistency are all factors that are used to reject less qualified securities.
We employ a core-based approach and seek out undervalued/ mispriced securities. We do not only consider absolute levels of valuation but also look for opportunities in which the discount to intrinsic value is high enough to compensate for risk associated with the investment.
Our portfolio is constructed from the bottom up and sector weightings will be reflective of where we are finding the highest risk-adjusted return potential.
Our investment philosophy and process, with refinements such as full integration of ESG (Environment, Social and Governance) factors, has remained intact throughout the team's existence.