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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Long Cast delivered strong Q3 performance with 8% returns, focusing on small, customer-centric companies with smart management teams. The fund maintains a concentrated approach, recently harvesting losses and holding higher cash due to geopolitical tensions."
Long Cast Advisers delivered 8% net returns in Q3 2023, bringing YTD returns to 20% and since-inception CAGR to 14%. The fund focuses exclusively on small company investing with a research-intensive approach, significantly outperforming small cap benchmarks. Top performers included MTRX, MAMA, QHRC and RSSS, while detractors were CCRD, RELL, DAIO and PDEX. The manager added to MTRX and harvested tax losses by exiting smaller positions in AIM, SNES and SANW, creating a more concentrated portfolio with higher cash levels. Key holdings include PDEX, a medical device contract manufacturer that has doubled its manufacturing capacity and backlog, and SOTK, a specialty nozzle manufacturer transitioning to complete unit sales. Both companies are positioned for growth in 2024. Given geopolitical tensions and rising rates impacting small caps, the manager is holding more cash while actively sourcing new ideas. The investment philosophy centers on high corporate IQ companies run by humble, iterative managers focused on customer problem-solving and long-term value creation.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
Manager demonstrates moderate-high conviction through concentrated portfolio approach, detailed analysis of specific holdings like PDEX and SOTK, and willingness to add to positions like MTRX. However, higher cash levels and acknowledgment of multiple scenarios prevents this from reaching high conviction territory.
Growth Outlook
Manager sees current environment as opportune for sourcing new small cap ideas and expects small caps to outperform when rates peak. However, acknowledges geopolitical tensions and rate headwinds affecting the asset class currently.
Risk Appetite
Portfolio is positioned more defensively with higher cash levels than usual due to geopolitical tensions. Manager harvested losses and concentrated the portfolio, showing cautious risk management despite maintaining core long positions.
Capital Deployment
Manager increased cash levels by substantially exiting three smaller positions (AIM, SNES, SANW) for tax harvesting purposes, creating a more concentrated portfolio with higher cash. Only added to one position (MTRX), showing net de-risking activity.
Forward Guidance
Manager is actively searching for new ideas but explicitly states never being in a rush when investing. Balanced approach of maintaining higher cash while continuing to scour for opportunities shows neutral deployment bias.
Language Signal
Language includes positive terms like opportune time, attractive investments, and growth expectations for 2024, but balanced with risk acknowledgment around geopolitical tensions and rate impacts. Slightly more constructive than cautious overall.
Perceived Risk
Manager identifies specific risks including geopolitical tensions and rising rates impacting small caps. Acknowledges that smaller companies have more vulnerabilities and get discounted earlier in cycles. Risk discussion is meaningful but not alarmist.
Opportunity Density
Manager explicitly states it is an opportune time to source new ideas in small caps and is actively scouring for opportunities. Sees current rate environment as creating discounted valuations, suggesting a reasonably rich opportunity set.
Time Horizon
Manager emphasizes long-term focus, states never being in a rush when investing, and discusses multi-year growth prospects for holdings. Investment philosophy centers on patient capital and long-term value creation, with explicit mention of taking the long view.
