The world’s largest source of micro cap stocks is in the US. Over a full market cycle, a well-diversified portfolio of high quality US micro cap companies run by top calibre management teams should significantly outperform larger cap portfolios. The companies targeted by the THB US Micro Cap Fund typically range in size from $250m to $750m in market capitalisation, and tend to grow faster and have more rapid earnings growth. Due to the market’s inefficiency – 45% of the US micro cap universe have no public earnings estimates – there is also potential for outsized returns. More than 50% of all US merger and acquisition activity is typically in micro cap companies and balance sheets are the healthiest in 20 years.
About the manager
THB Asset Management (THB), an investment franchise of Victory Capital Management Inc., is a dedicated micro and small cap specialist investment franchise based in Connecticut, USA. Founded in 1982, THB has 37 years’ experience investing in US micro cap stocks and has one of the longest and most distinguished track records in US and international (ex- USA) micro cap markets.
About the strategy
THB thinks and acts like a business owner. It seeks to invest alongside ‘owner entrepreneurs’, pursuing experienced management teams with a proven track record and a material level of outstanding shares. THB’s investment strategy focuses on easy to understand businesses with strong balance sheets, little debt, high tangible asset ratios and stable profitability. It focuses on companies where the market has undervalued their potential, and there is a catalyst for change. THB typically holds ~100 stocks, with a bias towards the smallest part of the micro cap universe and stocks that have historically displayed less volatility.
1. Returns in AUD as at 31 March 2021 on a net, pre-tax basis and assume the reinvestment of distributions. Past performance is not an indicator of future performance. Fund inception date was 5 Sept 2014 however inception performance is calculated from 1 October 2014. ↵ Return to the reference
2. Victory Capital Management Inc. (Victory) is exempt from the requirement to hold an Australian Financial Services License under the Corporations Act 2001 (Cth) in respect of the financial services it provides to Wholesale Clients, and is not licensed to provide financial services to retail clients, in Australia. Victory is regulated by the Securities and Exchange Commission of the United States of America (US) under US laws, which differ from Australian laws. ↵ Return to the reference