"It is impossible to produce a superior performance unless you do something different from the majority."

Sir John Templeton

Towle & Co. executes a fundamental, bottom-up, value discipline that emphasizes the purchase of companies believed to be significantly undervalued relative to their private market worth. We look for well-seasoned companies with strong market positions in industries such as financial services, manufacturing, distribution, consumer products, transportation, and energy. While our deep value approach may include large capitalization stocks, the search for absolute value usually leads to equities with market capitalizations under $5.0 billion, an area commonly referred to as small-cap. Our years of experience indicate that companies with the highest rate of appreciation potential are most often smaller companies.

Why do smaller companies emerge as attractive stock selection candidates?

  • Less Interest – While roughly 75+% of all publicly traded companies in the U.S. are designated small-cap, the majority of investment attention centers primarily on the well-known, highly liquid, large-cap companies where hundreds of billions in investment capital is concentrated. Due to this lack of interest, smaller companies can trade at substantial discounts not only to their private market values but also to the valuation multiples of large-cap companies.
  • Less Information – Perceived as carrying more risk than large companies, investors also find it difficult and labor intensive to conduct adequate research to invest in and monitor a portfolio of small-cap stocks.
  • Less Liquidity – Although there are thousands of companies from which to invest, multi-billion dollar investment managers generally avoid small-caps because it can be a liquidity challenge to purchase and sell meaningful stock positions.