Wm Smith & Co. is an independent research company providing objective, fundamental equity research on “special situations” (primarily under-followed and under-valued) companies to a select group of institutional clients from both the traditional and alternative investment arena. Our role is to help clients understand both the tangible and intangible assets of a business. We believe such “special situations” exist in a number of sectors. Our fundamental research process begins by identifying specific catalysts that can help unlock values. One such specific catalyst is the purchase of a stock by “strategic investors”, well informed buyers that range from corporate insiders to entrepreneurial investors to institutional investors. We derive information on these strategic investors via the following information vehicles:
13D Filings – Investments by individuals or corporate entities outside of the company that exceed 5% of the total shares outstanding.
Insider Buying (Form 4) – Corporate insiders, defined as officers, directors, persons with policy-roles, and those owning 10% or more of any equity security of publicly held company.
13F Filings – Money management companies with assets under management in excess of $100 million.
Stock Buybacks – Executed open market corporate share repurchases.
For a more detailed definition of these forms, visit the SEC website at www.sec.gov
In each case, these “strategic investors” are committing significant amounts of capital. Our catalyst thesis holds that a large increase in stock ownership by such strategic investors provides a validation point in confirming the investment’s potential. This catalyst thesis has substantial anecdotal and empirical evidence, including the performance of our coverage companies relative to various performance benchmarks. This catalyst identification is just the advent of an arduous fundamental research process that includes:
Interviewing company management
Examining the company’s current and potential products and services
Understanding the company’s strategic strengths and weaknesses
Reviewing and re-reviewing all publicly available corporate financial data
Assessing the company’s competitive position and the specific sector potential
Evaluating the company’s strategic plan
Conducting multiple “channel checks” of the company by talking to vendors, customers, affiliates, etc.
In addition, we conduct both objective and subjective screens for each company to see that it meets one or more of the following criteria:
Transition companies – positive changes in management, strategy, business platform
Identification of trends early in the cycle
Many of the companies we follow have little, if any, Wall Street coverage and we believe large increases in stock ownership can provide an important validation point in confirming an investment's potential.
