What is US Mid Cap?
The US Mid Cap market can largely be defined as the 3rd to 5th size deciles, as measured by market capitalization of the US market, number from 500 to 800 securities, range in capitalization size from $3.5B to $30B and represent approximately 20% of total US stock market capitalization.
Mid Cap stocks are underesearched and underinvested relative to Large Cap as there are fewer average sell side analysts per stock and less investment strategies focused on the asset class. Mid Cap companies have proven businesses, sizeable market shares, revenue diversity and ample access to capital.
Approach to US Mid 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. Our 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 Mid Cap companies are relatively inefficient and that a focused portfolio of high-quality securities can offer superior risk adjusted returns.
Our US Mid Cap strategy will hold exactly 30 securities from the 800 securities within the Russell Mid Cap Index. We believe discipline and focus is a critical component needed to add consistent alpha in this asset class. These 30 holdings must pass THB’s stringent rejection criteria and be seasoned constituents of the Russell Midcap Index. THB’s proprietary RiskGgrading, Quality Assessment and company-specific debt levels, retained earnings and earnings consistency are all factors that are used to reject less qualified securities.
THB focuses 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 shares outstanding and/or debt. Self-funded companies have embedded optionality due to their superior balance sheet and cash flow characteristics. These companies can opportunistically acquire other companies and/or repurchase their own shares.
We employ a core-based approach which seeks to find the best companies regardless of the “style” classification as we believe style indices are largely driven by sector weighting versus being truly accurate representations of the member companies. 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.
We believe superior performance is delivered when risk is embedded in the research process versus managed afterwards. We believe our proprietary Risk Grading of a company can highlight issues missed during typical fundamental analysis. Its disciplined approach to risk at the security level allows THB to create a portfolio which has risk levels similar to Large Cap indices and lower than the Russell Midcap Index.
Why Choose US Mid 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.