Designed for investors seeking growth potential in promising emerging companies. See how small cap can fit into your investment strategy.
Designed for investors seeking growth potential in promising emerging companies. See how small cap can fit into your investment strategy.
We use our Fundamental Process, including our proprietary GRAPES valuation model, to screen the universe of mid-, small, and micro-cap companies to find attractive candidates. We are typically looking for companies with current solid operating results and conservative balance sheets that are trading at discounted prices.
TOP 5 HOLDINGS (AS OF 3/31/24)
Small Cap Stocks are stocks with a small market cap or capitalization, between $300 million and $2 billion. In the short to medium term, Small Cap investing involves more risk and tends to be more volatile than other equity-focused funds, but they offer larger long-term returns. Small caps have the potential to double or triple in value. However, there are risks involved.
Among the advantages of investing in Small Cap companies is the growth potential. All Large Cap stocks started as small businesses. Small Cap stocks empower investors by being part of that exponential growth. Another one is that large mutual funds don’t invest in individual Small Cap stocks. The Securities and Exchange Commission (SEC) has heavy regulations that make it difficult to establish positions of this size.
Lastly, while individual Small Cap stocks involve some risk, small caps usually outperform large caps in the long run. Small Cap investing makes it easier to boost one’s returns.
The Lyons Fundamental Small Cap Value Strategy identifies smaller companies poised for significant growth. By targeting undervalued stocks with solid fundamentals and conservative balance sheets, the strategy aims to maximize returns as business performance accelerates.
At the core of the investment process is fundamental analysis. The experienced investment team screens the universe of small and micro-cap stocks utilizing proprietary models like the GRAPES valuation framework. This rigorous approach isolates quality companies set to profit from economic tailwinds.
While investing in small caps entails greater volatility, the payoff can be exponential returns. By owning stakes early on, investors participate as select leaders rapidly gain market share over the long-term. The strategy’s diversification mitigates risks associated with individual names.
GRAPES (Growth Rate Arbitrage Price Equilibrium System) is our proprietary valuation model used to find undervalued stocks. GRAPES evaluates a company’s market value relative to accounting metrics using profitability and capital structure ratios. Higher profitability and lower debt justify a higher valuation, according to this model. We also apply other screens based on our studies of corporate events, including share sales and buybacks, dividend announcements, and mergers and acquisitions.
The Lyons Wealth Fundamental Small Cap Value Strategy has an established history of outperformance, providing investors exposure to winning small caps. As of December 31, 2023, the portfolio maintains an overall 5-star Morningstar rating, placing it in the top 20% of peers.
Over the last 10 years, the strategy has returned 10.91% annualized compared to just 7.16% for the Russell 2000 benchmark. This excess return demonstrates the success of the investment process in identifying market-beating small caps during all types of economic environments. The portfolio also displays attractive risk-adjusted returns with a Sharpe ratio of 0.56, well above the index’s 0.31. By balancing total volatility, the strategy maximizes compound annual growth.
With over 20 years of data, the Lyons Wealth Small Cap Value Strategy has shown it can turn volatility associated with small caps into outsized upside. This consistency sets it apart as an advisor investors can trust to navigate the category.
The Lyons Wealth Fundamental Small Cap Value Strategy maintains a strategic yet adaptive sector allocation to capitalize on economic trends. As of March 31, 2024, the portfolio held the following sector breakdown:
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31 Years Managing Wealth
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15 Years with Lyons Wealth
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Senior Portfolio Manager & Analyst
9 Years with Lyons Wealth
At Lyons Wealth, we get to know our clients to understand their specific goals, objectives, needs, and future desires. We look for a good fit for everyone involved and want to engage in long-term relationships with the clients we advise. Our client roster ranges from:
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Disclaimer:
Past performance does not guarantee future results.
Subsequent markets may perform better or worse than for the periods shown, which will cause the actual results of a portfolio to be better or worse than shown. LIM does not guarantee or offer any assurance that any portfolio or account will be profitable, meet a client’s stated objectives, or prevent or reduce losses. A client may lose money by investing in a portfolio. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase. This is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.
The Fundamental Small Cap Value Composite consists of accounts that hold U.S. small cap stocks selected by using LIM Fundamental Analysis. This analysis identifies undervalued companies using LIM’s GRAPES valuation model and applies other selection criteria relating to a company’s business prospects, management quality, and capital structure. The benchmark for the composite is the Russell 2000 Index, presented in U.S. Dollars. The Russell 2000 is a market cap weighted index of small company US stocks. In the past the composite has displayed higher volatility than its benchmark. Investing in small capitalization companies generally involves greater risk than investing in larger, more established companies. The S&P 500 is a market-capitalization weighted index of 500 leading publicly traded companies in the U.S.
The composite includes fully discretionary, management fee-paying and, beginning on January 1, 2011, non-management fee-paying accounts, including those accounts no longer with the firm. The U.S. Dollar is the currency used to express performance. Returns are presented net of management fees and include all trading expenses and the reinvestment of all income and dividends. Net of fee performance was calculated using model management fees, including for non-fee-paying accounts. The model fee is our current maximum fee of 1.5% per year for separately managed accounts which do not pay a performance-based fee. Actual advisory fees and transaction fees will vary depending on, among other things, the portfolio, account size, and activity. Fees are described in LIM’s ADV Part 2A.
On September 24, 2019, Lyons Investment Management acquired the asset management business which managed the composite presented. At the time of the acquisition LIM was affiliated with the prior firm with shared investment personnel. Performance shown prior to the acquisition date is from the prior firm. The historical performance has been linked to performance achieved at Lyons Investment Management.
The benchmark data provided was obtained from publicly available reports. LIM believes such data to be reliable but does not audit, verify, or guarantee its accuracy or completeness. When comparing the performance results to a benchmark, clients should keep in mind that: 1) Indexes are unmanaged and unavailable for direct investment. 2) Benchmark returns include reinvestment of income, but do not reflect taxes, or investment advisory or other fees that would reduce performance. 3) Performance information of benchmark indexes is included for comparison purposes only. 4) Indexes and benchmarks may not directly correlate or only partially relate to the composite.
Lyons Investment Management, Inc. (“LIM”) is an SEC registered investment adviser managing separate accounts that are fully discretionary. SEC registration does not constitute an endorsement of the firm by the Commission, nor does it indicate that the adviser has attained a particular level of skill or ability
The Morningstar RatingTM for separate accounts, commonly called the star rating, is a measure of a separate account’s risk-adjusted return, relative to other separate accounts in the same Morningstar Category. Separate accounts are rated from 1 to 5 stars, with the best performers receiving 5 stars and the worst performers receiving 1 star. Separate accounts are rated for up to three periods (three, five, and 10 years), and ratings are recalculated each quarter. The Morningstar Rating for separate accounts uses an enhanced risk-adjusted return measure, which accounts for all variations in a separate account’s monthly performance, with more emphasis on downward variation. Separate accounts are ranked against others in the same category and stars are assigned as follows: Top10% 5 stars, Next 22.5% 4 stars, Middle 35% 3 stars, Next 22.5% 2 stars, Bottom 10% 1 star.
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5 Star Overall RatingTM out of 158 small value funds as of 03-31-24. Compensation was provided for the display of this rating.