Alta Fox: Makings of a Multibagger

Johnny HopkinsAlta Fox2 Comments

Alta Fox recently released its Q3 2020 commentary which includes a section titled “Makings of a Multibagger” and the Goal for Constant Improvement. Here’s an excerpt from the commentary:

Alta Fox consistently seeks to identify exceptionally high-quality businesses at cheap multiples of normalized earnings over a medium-term time horizon of 3-5 years. Our hunt for quality at a cheap price often leads us to structurally inefficient small and micro-cap equities where there is less competition from institutional investors.

However, at Alta Fox, we have always indicated our belief that high-quality, attractively priced companies can be found in many places, regardless of market cap. In Q1-2020, the market downturn provided many interesting opportunities outside of our more common market cap style.

This year, two of our top contributors to performance have been multibillion-dollar companies that we had long admired but were not able to purchase at an attractive price until the market meltdown in March. Because we already knew these businesses well and had followed them closely on our watchlist, we were able to act decisively during a market panic. We have also had several strong performing international equities contribute to results this year and we continue to maintain significant exposure outside of North America.

At Alta Fox, we believe a commitment to ongoing “research and development” will likely result in better long-term investing processes and outcomes for our investors. Just as we expect from our portfolio companies, Alta Fox is focused on creating long-term value and building a fortified business that will withstand the test of time. We are very aware that the fast pace of public markets can make it easy to get lost in chasing one idea after the next causing individuals to neglect personal development. Much of our success since inception is attributable to years of studying what has come before and taking a creative and open-minded approach in preparing for what is yet to come.

On that note, we continue to deeply study great businesses and stock market outliers. While we keep most of our work internal, we recently decided to publish our “Makings of a Multibagger” research, which our three interns worked diligently on this summer. Their task was to analyze the top performing small-cap stocks in developed markets over the last five years and draw both qualitative and quantitative conclusions. Eight of the top ten performing small-cap stocks in their report are international companies and this exhaustive study generated healthy internal discussion over how to efficiently improve our process for analyzing the most promising international businesses.

Recently, we have been spending more time than usual on international opportunities given the valuation discount that often exists relative to U.S. companies.

You can read the published findings – Makings of a Multibagger here:

Click to access Conclusion+Deck-+Makings+of+a+MultiBagger+-+FINAL-compressed.pdf

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2 Comments on “Alta Fox: Makings of a Multibagger”

  1. I know these comment sections are a barren wasteland, but anyway… will the Alta Fox research help or hinder an investor over the coming 5 years? Jeremy Grantham recently said something along the lines of 90% of an outperforming fund manager’s outperformance comes from being in the right place at the right time (having the right factor exposures for whatever the market had recently favoured). So is this research just going to point out the factor exposures that have worked well over the past 5 years, but going forward the market will come to favour something else?

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