Global Alpha logo.

Our approach

We are uniquely focused on constructing the best global,
international, and emerging markets small cap portfolios
that we can possibly deliver for clients.

Thematic approach

Portfolios are constructed according to asymmetric, uncorrelated, economic and global market themes rather than a stock’s relative valuation within its industry sector.

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A big universe of
small cap companies

 

Our investment universe includes all companies with market capitalizations ranging from approximately US $200 million to US $10 billion. In the search for companies with unrecognized growth potential, we use various screening methodologies across global databases to identify those companies that offer strong financial productivity, a historical pattern of earnings growth, and management teams with a significant ownership stake.

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Knowing
what to buy

We submit each company to a thorough assessment of its business model. Screening on measures such as profitability, revenue growth, and balance sheet strength help narrow the universe.

 

We identify, through fundamental analysis, management interviews, and on-site visits, companies with features such as dominant market share, sustainable competitive advantage, and clearly defined growth strategies. We use discounted cash flow analysis to determine implied margins, capital intensity, and growth rates. Finally, we conduct an asset-based valuation analysis on each selected name.

Knowing
when to buy

In determining investment opportunities, we identify stocks
trading at a significant discount to intrinsic value.

 

We also identify the catalysts expected to drive realization of their true value.
From our best ideas, we build diversified portfolios of 50-70 stocks.

Knowing
when to sell

Knowing when to sell a security is critical to realizing and protecting accumulated gains. We maintain the purity of our small cap portfolios by adopting a strong sell discipline.

 

Positions may be sold if: a company’s market capitalization exceeds the upper limit of the benchmark; there is a change in strategy, a loss of competitive advantage or an excessive valuation; or we identify a better investment opportunity.

Risk management

 

By their nature, smaller companies tend to have higher levels of stock-specific risk. We manage this risk in three key ways:

  • 1. rigorous research and due diligence when adding a stock to a portfolio;

  • 2. blending stocks according to uncorrelated, asymmetric investment themes; and

  • 3. inclusion of secular or cyclical companies identified through bottom-up analysis as having unrecognized growth and/or that add diversification to a portfolio.

Insights