Opus believes many parallels exist between microcap value investing and horse racing. The market for common stocks is like the pari-mutuel system at the racetrack. Patrons go to the track to bet on horses and the odds change based on those bets – much like the stock market. If someone believes a horse is likely to beat the odds, one will bet on that horse. If all bettors predict a certain horse to win, the odds will reflect that consensus, and the return on investment will be poor. This analogy holds true for the stock market.
With over twenty years of experience, Opus has a history of picking winners, as we have demonstrated superior stock selection by uncovering companies that the market has mispriced. With this experience, Opus believes it has a distinct edge over other bettors in three ways: informational, analytical, and time-horizon.
get interesting with the inefficient U.S. microcap universe, where more than
20% of companies receive no analyst coverage. Just as in horse racing, large
events, i.e., the Kentucky Derby, receive extensive coverage while local tracks
receive little to none.
Uncovering and capitalizing on pricing inefficiencies has
been Opus’ bailiwick for over two decades.
With deep roots in fundamental research, Opus has an analytical edge in picking winners compared to a person who only bets on horses with the lowest odds. Opus uncovers businesses that fly below the radar before being recognized by the broader market.
Opus’ Microcap Value investment philosophy utilizes the firm’s extensive experience and research within the smaller capitalization space. The Opus Microcap Strategy is rooted in finding companies with the combination of low valuation, high quality, and strong momentum within micro capitalization stocks, an approach that consistently outperforms any single factor on a stand-alone basis.
With less liquidity than their small and large cap brethren, microcaps have the chance to outperform for longer periods of time than expected, as they get an incremental buyer pushing the share price up due to a supply imbalance. Horses that make it to the Kentucky Derby start racing at the local tracks, making their way up the ranks from maiden races to stakes races. Much like stocks, which grow from microcap land to small cap territory and beyond, creating “multi-baggers”. Each additional market cap spectrum creates an incremental buyer, boosting a healthy rate of return if invested in the earlier stages.
Opus’ long-term perspective, thinking of the next three to five years instead of quarters, allows us the time to take advantage of this price appreciation.
“Adopt the pace of nature: her secret is
– Ralph Waldo Emerson