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).
Our experienced portfolio management team is supported by a dedicated team of research analysts, traders, and administrative personnel.
Years of Micro Cap Experience
Approach to US Micro Cap
THB has been focused on less efficient areas of the public markets for over 35 years. Our clients include corporations, endowments, pension plans and family offices. THB’s nine-person investment team works collaboratively to discover and research opportunities which meet our philosophy. The firm seeks out companies that are led by strong management teams, trade below their intrinsic value and have superior operating metrics.
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.
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 or 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.
Performance Snapshot (Net of Fees)
Sector weightings are determined using the Global Industry Classification Standard (“GICS”).
Sector weightings are subject to change.
Active Share vs Russel Microcap Index
Active share is the percentage of the fund’s portfolio that differs from the benchmark index. High active share indicates a high degree of active management.
Market Cap Distributions
Market cap, the total value of all a company’s shares, is calculated by multiplying the price of a stock by its total number of outstanding shares.
Our portfolio companies have returned a healthy amount of capital back to shareholders via repurchases and dividends, illustrating their current financial strength and the variety of options available to them in seeking to enhance shareholder wealth.
Why Choose US Micro Cap?
Founded in 1982, THB Asset Management “THB” is a 100% employee-owned, boutique firm that has been managing equity strategies for more than three decades. We believe alignment is a large part of any relationship and we feel fully connected with our clients through direct ownership of our firm and personal investments in the strategies we manage. Our investment philosophy and process, with refinements such as full integration of ESG (Environment, Social and Governance) factors, has remained intact throughout the firm’s existence. We believe there are few other firms that can match the collective years of experience that our team provides.