Our Approach
Investment Philosophy
We seek to identify undervalued companies relative to the broad market. Our investment philosophy is rooted in the following beliefs: The price of a security is determined by the value of the underlying business. Our investment decisions are made with a long-term perspective, typically 2-3 years, allowing sufficient time for the market to recognize the underlying value of selected companies. Rigorous, company-specific research conducted by an experienced team drives our investment process and supports construction of best-idea portfolios. Our investment objective is to outperform the benchmark by 200 basis points annualized over a market cycle.
The intelligent investor is a realist who sells to optimists and buys from pessimists.
Our Process
Investment Process
Every equity investment undertaken by SCV Capital begins with in-depth, company-specific investment research. We analyze financial fundamentals, management strength, and competitive positioning to uncover hidden opportunities within the small-cap universe.
Our commitment to thorough research ensures that we make informed, data-driven decisions designed to uncover long-term value.
- Quantitative Screening: Identifying companies trading at significant relative discounts to the broad market based upon key valuation metrics.
- Fundamental Analysis: Evaluating business models, market positioning, and the potential for operational or structural improvement. Assessment of any material ESG-related issues or risks.
- Management Assessment: Meeting with company leadership to understand their strategy, track record, and alignment with shareholder interests.
Our commitment to thorough research ensures that we make informed, data-driven decisions designed to uncover long-term value.
Disciplined Portfolio Construction
Once we’ve identified potential investments, our team constructs high-conviction portfolios with a focus on balancing risk and opportunity. This step involves:
- Position Sizing: Determining initial investment position sizes based on the level of confidence in each company’s business fundamentals and valuation.
- Number of Positions: Generally 45-55 names.
- Fully Invested: Cash is typically less than 1% of assets.
Our disciplined portfolio construction process ensures that every position contributes meaningfully to the overall strategy.
Ongoing Risk Management
Risk management is integral to our investment process. We continuously monitor investments to protect against potential downside risks while maintaining upside potential. This includes:
This proactive, methodical approach helps safeguard our clients’ investments while staying aligned with their objectives.
- Regular Reviews: Conducting monthly reviews of portfolio holdings to evaluate performance and assess ongoing viability.
- Security and Sector Limits: Maximum individual position size it typically 3%. Absolute sector position limits of 5% greater than the largest sector in the benchmark.
- Sell Discipline: Reducing or exiting positions when the thesis has been realized, fundamentals have deteriorated, or better opportunities arise.
- Client Communication: Provide regular updates to keep clients informed about portfolio performance and adjustments.
This proactive, methodical approach helps safeguard our clients’ investments while staying aligned with their objectives.
Contact Us to Learn More About Our Approach
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