Hello, everyone. My name is Chris Dowd. Let me introduce you to the Third Avenue Small Cap strategy.
The Small Cap strategy has a nearly 30-year track record, dating back to 1997, and has maintained a consistent approach that has stood the test of time.
We have five core principles.
First, we filter our small cap universe using the balance sheet as our first criterion. In short, we are looking for companies that possess financial staying power. What that really means is we are looking for businesses with a lack of liabilities. This maximizes our ability as equity investors to hold for the long term and acts as a bridge for companies to extract the maximum value from their assets.
Second, price consciousness is very important to us. We are disciplined about buying securities at a price where we feel we are properly compensated from a risk-return standpoint.
Third, by our very nature, we are contrarians. We are often investing in rolling pockets of sector dislocation. When it comes to idea generation, we do not choose industries, they choose us. Our long-term investment horizon gives us a unique vantage point to express views as to how a business might transform and mature over a cycle.
Fourth comes resource conversion. This is a term coined by Third Avenue when referring to potential paths toward realizing value that are in addition to companies improving operating results. Essentially, we are looking for multiple ways to win. Mergers, acquisitions, recapitalizations, and share buybacks represent scenarios we explore to help us hone in on how best to close the value gap. We often refer to this mindset as a private equity approach to the public markets.
The fifth principle is prudent concentration. We firmly believe in managing a portfolio of 35 to 40 names centered on our best ideas. Compared to an industry where small cap peers might hold 80 to 100 names, we believe it is important to know what we own through rigorous fundamental research while maintaining a diversity of forward return drivers spread across the portfolio.
If you would like to hear more about these five founding principles, we invite you to download the latest shareholder letter found on our website and email us to schedule an introductory call.
Thank you again for your interest in Third Avenue.
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