The Case for High-Quality Small Caps:

The risks to investors loom large in our opinion.  At the same time, our research suggests this may be one of the best times for active managers who favor high-quality firms at reasonable prices.  Please see our work on the opportunities in small cap companies, The Low Cost of High Quality.

With over a decade working together our research team has written a barrage of papers about the risks and opportunities in stocks of various market capitalizations. Investors obsessed with growth potential in large cap companies have sent valuations of certain stock prices to untenable levels in our view.

Our research piece on High-Quality Investing in Mid Cap Stocks presents evidence that there are opportunities to buy terrific companies at below average prices.  That same research also provided data showing that many firms that lose money or lacked a real business model were trading at record valuations.

We understand investor’s affinity for low cost market index products that seek to replicate the total market.   In his book “A Margin of Safety,” legendary investor Seth Klarman noted that index funds tend to become most popular during bull markets.  Please see our upcoming publication of what we learned from Mr. Klarman’s legendary book.  We believe many of today’s stocks provide a “margin of peril” to use a term from his timeless text.

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Disclaimer
The information, data, analyses and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. 

Kailash Capital, in preparing the information, data, analyses and opinions presented herein, has obtained data, statistics and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seeks independent verification of any of the data, statistics, and information it receives. 

Kailash Capital and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.