Hermes Small & Mid Cap
Why Smaller Companies?
There is a low awareness of the business fundamentals of smaller companies. This, along with the limited coverage of small and mid cap equities, an over-reliance on earnings based valuation methods, and the short-term focus of many market participants, leads to a failure to reflect accurately the prospects for businesses. This ultimately leads to mis-priced assets and our market opportunity.
We believe we can take advantage of these inefficiencies by:
- Adding substantial value in smaller companies through active fund management
- Stock picking from the bottom-up
- Conducting independent, detailed, fundamental analysis of a company before we invest
- Thinking like owners rather than like stock holders, making for better long term returns
- Focusing on cash based methods of valuation, especially discounted cash flow, which is
superior to relying on forecast earnings alone
- Considering the lifecycle position of companies. This help us understand them better
