ARS Focused Small Cap Strategy

Presentation Factsheet

Investment Strategy

We believe market inefficiencies create mispricings and undervaluations, which can be substantial in smaller capitalization stocks. We employ a private equity valuation approach in assessing public market equities to identify U.S. micro to small cap companies with capitalizations typically ranging from $100mm–$2.5 billion trading at discounts of 50% or more from intrinsic value.

Investment Process

Allocation Strategy

Our research begins with analyzing important secular trends identifying areas in the economy that will thrive and to which capital will flow. To identify undervalued small cap companies, we integrate:

  • Fundamental analysis of various metrics, such as cash flow, earnings per share and EBITDA
  • Less conventional measures, such as hidden assets, strategic value and earnings power masked by company specific issue(s)

Portfolio construction

Once we have identified a specific opportunity but before we establish a position in the stock, we identify catalysts that could cause the company’s stock price to align more closely with its intrinsic value and develop a strategy to close the valuation gap. Our highest conviction ideas are appropriately emphasized in fund’s portfolio. Further, as involved investors, we engage management teams and shareholders to convince management to adopt strategies that can drive company performance and maximize shareholder value. Investments are made with initial time horizons of 24–36 months.

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