The curated database of hedge funds that publish investor letters. Research by geography, strategy, and schools of thought.
| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Mar 31, 2024
Bernzott Capital's US Small Cap Value strategy gained 8.5% net in Q1 2024, significantly outperforming the Russell 2000 Value's 2.9% return. Energy holdings led performance with Archrock and Viper Energy advancing on robust compression demand and improving oil prices respectively. HCI Group was the top contributor, rising 33% on strong results and premium assumptions from Citizens Property Insurance. The manager trimmed Lancaster Colony as it approached fair value and exited Evercore and Gentex after achieving targets. Materials detracted as MP Materials declined 28% on weak rare earth prices, though the manager added to the position. The firm added PotlatchDeltic as a new timber REIT position. The manager believes small cap valuations relative to large caps are near 20-year lows despite higher growth expectations, creating an unsustainable gap. They expect market broadening and normalizing rates to benefit small caps as mega-cap momentum fades. The strategy focuses on high quality companies with strong fundamentals trading at significant discounts to fair value.
Bernzott Capital seeks high quality small cap companies with market leadership, recurring revenue, high margins, strong returns on capital, and shareholder-friendly management teams trading at significant discounts to fair value, believing these attributes will outperform over full market cycles.
The manager believes the gap between small cap and large cap valuations is unsustainable and should narrow over time as inflation cools and rates normalize. They expect the broadening out of the market to benefit small caps as the momentum trade in mega-cap stocks fades, creating a constructive backdrop for small cap investing.
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