Small-Cap Value

Deep Value Investing

We focus on inefficiently-priced, underfollowed stocks trading at low multiples of book value and cash flow.

  • Philosophy

    Taking Advantage of Volatility & Mean Reversion

    Equity markets are inherently emotional and often overreact to events. This creates exploitable dislocations that offer excess return opportunity for contrarian, long-term-oriented investors.

    Small-cap stocks can experience larger dislocations. Lack of analyst attention, less transparency and lower liquidity all magnify the impacts from emotional investor behavior.

    Aegis believes excess returns can be generated by:

    • purchasing a well-researched portfolio of fundamentally sound small-cap stocks trading at low valuations during periods of stress or neglect, when liquidity is low and investor sentiment is poor,
    • holding these investments patiently through periods of short-term price volatility while fundamental conditions normalize, and
    • selling after fundamental trends reverse, as recovery becomes visible and investor sentiment improves, driving valuations higher.
    Stock Prices Typically Overreact to Changes In Fundamentals
  • Sources of Alpha

    Independent/Contrarian Mindset

    We invest in companies that are fundamentally undervalued and often unpopular.

    We work to avoid recency bias in our behavior, seeking to be aggressive amid market panics and cautious when sentiment is overly bullish.


    The investment team has an average of 17 years of small-cap value investing experience and possesses a working understanding of a large number of companies within this segment of the market.

    We believe our process of diligently and systematically working to obtain an evidence-based detailed technical understanding of company fundamentals can reduce investment risk.


    We do not rely on historic price volatility as an effective measure of investment risk as we view high valuation multiples as a more indicative measure of risk of permanent capital loss.

    We will hold cash when the investment opportunity set offers a poor risk/reward proposition.

    We will concentrate capital in a particular sector and in a small number of holdings when we have conviction.

    We do not manage with the goal of tracking the short-term performance of any benchmark or index.

    Patient/Long-Term Oriented

    Twenty years in the business has taught us the patience and fortitude necessary to ride out temporary periods of volatility and price compression.

  • Investment Process

    Finding Undervalued Securities

    • The Aegis investment process begins with a quantitative overlay to identify potential investment candidates.
    • Screens are run on U.S. and Canadian listed stocks.
    • Fundamental, value characteristics sought are low price-to-book and low EBITDA/cash flow multiples.
    • Screens also illuminate financial leverage. Stocks appearing cheap on certain fundamental valuation measures are evaluated in the context of leverage-driven capital structure risk.
    • Review:
      • Company financials
      • Corporate presentations
      • Regulatory filings
      • Historic conference call transcripts
      • Industry publications/periodicals
      • Sell-side research
    • Attend investor/industry conferences.
    • Converse with other buy-side investors.
    • Conduct company visits/conference calls.
    • Evaluate cyclical/secular trends, competitive industry dynamics, sources of financial stress or competitive advantage.
    • Recast balance sheet to current market prices.
    • Recast income statement to remove one-time impacts and determine normalized cash flow.
    • Evaluate discreet tangible factors likely to impact cash flows within the next 2-3 years and estimate future normalized cash flow
    • Assess management ethics, competency and capital investment discipline.
    • Estimate company’s intrinsic value through evaluation of both asset-based and cash flowbased factors.
    • Invest when sufficiently discounted purchase of future normalized cash flows or assets is possible.
    • Concentrate on best ideas/most undervalued industries while remaining cognizant of correlated macro risks.
    • Top 10 holdings represent ~50 percent of assets.
    • No new investment into any individual holding after 5%.
    • No new investment into any industry group after 25%.
    • Evaluate quarterly results, new material events and developing trends.
    • Revisit management and conduct call updates.
    • Monitor for deterioration in fundamental assumptions.
    • Reevaluate "winners" approaching intrinsic value estimate.
    • Engage in fact-based debate and questioning throughout investment process.



A measure of financial performance that gauges the performance of an investment against a market index or benchmark which is considered to represent the market’s movement as a whole.

Book Value

A company’s common stock equity as it appears on a balance sheet.

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow.

EBITDA (Earnings before interest, taxes, depreciation and amortization)

An indicator or a company’s financial performance and is used as a proxy for the earning potential of a business; EBITDA strips out the costs of debt capital and its tax effects by adding back interest and taxes to earnings.


A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share.

Small-Cap Stock

Term used to classify companies with a relatively small market capitalization. A company's market capitalization is the market value of its outstanding shares. The definition of small cap can vary among brokerages, but it is generally a company with a market capitalization of between $300 million and $2 billion.

Value Investing

An investment strategy where stocks are selected that trade for less than their estimated intrinsic values. Value investors actively seek stocks they believe the market has undervalued.