Punch believes that investing in small companies is the best way to generate superior long term investment returns. The core tenets of our philosophy are:
- Returns on Capital are Greatest Where Capital is Most Scarce. We believe that the best opportunities exist where expectations are the lowest. High expectations equals high risk.
- The Importance of Risk Control. Our approach demands a margin of safety before we invest. We believe that preservation of capital is the essential component of durable long term investment success. This is often a direct function of a manager’s ability to avoid investments where optimism is high and valuations are demanding.
- Research Matters. There are no shortcuts to good small cap stock-picking. Lack of attention and analyst coverage creates persistent pricing inefficiencies. We seek to build an information edge by performing thorough fundamental research.
- Extreme Investor Behavior Creates Value. We are keen observers of investor sentiment and are constantly on the lookout for behavior that is short-sighted, emotionally-driven or uninformed. When prices move to irrational extremes, opportunities develop for patient long term investors.
- Value Then Growth. We combine the discipline of a value investor with the imagination of a growth investor. This approach controls risk while capturing the significant growth potential of undiscovered small companies.