THB Micro Cap seeks long term capital appreciation over full market cycles by using a disciplined, valuation-based approach. We invest in companies within the Russell Micro Cap Index. The product will typically hold 100-125 securities and have a high active share.
What is US Micro Cap?
The US Micro Capitalization market can be broadly defined as the smallest (9th and 10th) size deciles, as measured by market capitalization, of the US market. These companies typically number between 1,500-2,000, range in capitalization size form $30M-$1.5B, trade on major exchanges (NYSE, Nasdaq), and in aggregate represent approximately 2% of the total US stock market capitalization. We believe Micro Cap stocks are the most inefficient areas of public equities as they are typically neglected by larger investment managers and brokerage firms.
A significant number of US Micro Cap companies have no published earnings estimates. These smaller companies tend to have sizeable insider ownership and low amounts of leverage (a majority of companies have zero net debt).
THB believes that stocks of Micro Cap companies are inefficient and that a focused portfolio of high-quality securities can offer superior risk adjusted returns.
Our US Micro Cap strategy typically holds 100-125 securities from the approximately 1,500 stocks within the Russell Microcap Index and will have a high active share.
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.
Why Choose US Micro Cap?
Please contact us by filling out our online form or call us at (203) 653-7060 to learn more about our firm, process and how US Micro Cap can possibly add value to your overall investment approach. We believe our strategy can be used independently, as an alternative/complement to private equity or to complete existing Small Cap allocations.