The Might of Mean Reversion

    Making Simple Concepts Work for Your Investments:

    • We have written a number of papers about the simple math that makes large cap investing in even high quality names difficult
    • The chart below simply takes the market of large cap stocks and divides that by small cap stocks
    • While Large Caps have pulled back from an extreme to a level last seen at the peak of the internet bubble
    • There is still a great deal of potential for Small Caps to significantly outperform their Large Cap peers
    • As documented in our research, we believe that asset bloat in index funds and speculative ETFs that focus on loss making firms with massive market caps has caused this anomaly. 

    Please look out for our upcoming Quick Take explaining the magnitude of the opportunity and some promising Small Cap candidates we believe may be great investments!

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    Sources
    1. Margin of Safety Risk-Averse Value Investing Strategies for the Thoughtful Investor, Seth A. Klarman, p. 113
    2. Bottom 20% of firms in the Kailash ABM Universe based on 36m trailing beta, ex-financials
    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.