What is US Small Cap?

The US Small Capitalization Market can be broadly defined as the 6th to 8th size deciles, as measured by market capitalization of the US equity market. These companies typically number from 1,700-2,300, range in capitalization from $100M to $5B, and in aggregate represent approximately 8% of total US stock market capitalization. We believe Small Cap stocks are relatively inefficient as they have a lower average number of sell side analysts per stock than Large and Mid Cap equities.

 

Approach to US Small 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 Small Cap companies are inefficient and that a focused portfolio of high-quality securities can offer superior risk adjusted returns.

Our Small Cap strategy typically holds 70-90 securities from the approximately 2,000 stocks within the Russell 2000 Small Cap 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 and mispriced securities. We do not only consider absolute levels of valuation but look for opportunities in which the discount to intrinsic value is high enough to compensate for risk associated with the investment. THB looks at the long-term track record of a company (3 to 5-year time frame) to better understand its potential.

The firm’s approach is designed to look through short term disruptions and focus on the long term. The target holding period is 12-24 months. 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 Small 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.

By partnering with THB, you’ll find out about our sound philosophy that drives all of our investment decisions on our clients’ behalves. We believe in consistency and innovation. We combine the insights and knowledge gleaned from decades of experience in the field to enhance our processes and discover investment opportunities for our clients.

THB Asset Management was established in 1982 with a focus on our Small Cap strategy. Over the years, our methods have evolved and grown to include other strategies that similarly focus on finding undervalued companies that we believe make sound investment opportunities. In 1998, we launched one of the first U.S. Microcap Strategies, and in 2015, we added the THB International Opportunities strategy.

Please contact us online or call us at (203) 653-7060 today to learn more our firm, process and how Small Cap can possibly add value to your overall investment approach. We believe our strategy can be used independently or as an alternative/complement to private equity.