It is our firm belief that the small- and micro-cap markets occupy an important and legitimate place in the pantheon of the public markets, and that the overwhelming majority of companies in these markets are legitimately dedicated to creating vital, successful businesses. However, it is the unfortunate truth that these markets are plagued by a small percentage of unscrupulous purveyors of misinformation who prey upon the seductive appeal of rapid gains and double-digit returns. At Source Advisors, we are dedicated to improving the transparency in the small- and micro-cap markets through the judicious application of objective analytical tools and valuation methodologies to produce clear, coherent research on companies in these markets, and to disseminate this research through our extensive distribution network.
After listening for years to many intelligent, experienced investors who lamented the lack of information, and sometimes outright misinformation, in the small- and micro-cap markets, we began to wonder why so many companies in these markets are completely devoid of institutional analyst coverage. Ironically, in the present Information Age, the lack of independent coverage in these markets is becoming even more chronic.
The plain and simple truth of the situation is that most small- and micro-cap companies simply do not approach trading levels sufficient to induce analysts from the larger financial institutions to cover them. At one time, this discrepancy was ameliorated by the presence of regional brokerage houses that were able to focus their energies and attention on some smaller corners of the public markets. However, with the advent of Internet trading platforms and large brokerage houses driving the move towards consolidation of the industry, smaller firms are being driven out or swallowed up. Consequently, these smaller brokerages that once were willing and able to provide analysis for some of the more neglected aspects of the market have largely disappeared.
Does this mean that investing in small-caps is any less viable a strategy? Of course not. In fact, small caps have many inherent advantages that cannot be replicated through any other type of investment vehicle. First, the very volatility that makes small-caps a riskier play than blue-chips also presents unique advantages for the opportunistic investor. Unlike any other investment vehicle, small-caps offer the ability to generate more substantial returns in a shorter period of time, precisely because of their dynamic nature.
Second, the limited market capitalization of these companies renders them largely immune from an institutional investor like a fund manager.
These large investors direct investments on a scale that would result in the acquisition of substantial chunks of any single small- or micro-cap company, entailing complicated and onerous regulatory and compliance burdens due to the percentage level of ownership. As a consequence, many sound investment opportunities reside in obscurity, avoiding the attention of the larger investment community and allowing the astute risk-tolerant individual investor to capitalize on many of these companies' inherent strengths. After all, by the time that these companies make their way into the portfolios of the large institutional investor, they have lost much of the appeal that stems from their tremendous growth potential. At Source Advisors, we work to shed light on these companies, and provide the investment public with the requisite research and analytical tools to make sound, informed decisions.
At Source Advisors, it is our stated mission to enhance the transparency of the small- and micro-cap markets through the assiduous use of sound, reliable and time-tested analytics. We bring to bear combination of fundamental, technical, and structural benchmarks to elucidate individual small- and micro-cap companies. From there, we distribute the results of our research through an extensive distribution network. All of our work adheres strictly to applicable regulatory requirements and industry standard practice guidelines. We provide fee-based research, but the precise nature and amount of compensation is always fully disclosed in order to maintain the highest standards of objectivity.
