Brian Bares


Brian Bares, Bares Capital Management – The Small Cap Advantage

Brian Bares is  author of The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns, and the founder & portfolio manager at Bares.

Bares leans more toward the Munger approach and focusses on the small/micro-cap space

  • Small Caps
    • Better compounders
    • Persistently outperform larger cap stocks
    • More good ideas
    • Less market efficiency in prices
    • Less or No analyst coverage
    • 3k-4k companies smaller than those falling in the Russell 2000
    • Most mangers typically start with a screen
      • Bares leary of ‘rear view mirror’ aspect
      • Screen leads more to ‘just cheap’
      • Bares uses a ‘Moats & Management’ search
  1. First search for 40 ‘best’ companies in small/micro space
  2. Then get into the valuation of this group
  3. Pare down to the ‘best’ 10 options
  • Long Term price is approximately the long term growth in business value per share


  • Moat +Management=Quantitative
    • Find before other managers
    • Find before the results are in the 10-K
    • 8 analysts are constantly on the road
    • Intentionally stay small
    • Note: over 80% of market risk is diversified away in first 8 stocks (assuming they are un-correlated)


  • Example is Stratasys, Inc. (NASDAQ:SSYS)
    • Manufacture 3-D printers
    • Nascent industry & growing quickly
    • ‘Razor Blade’ model
    • Came from #2 position (Former #1, 3-D Systems dropped the ball) now has +41% market share
    • The management invested the technology
    • Deal with HP for branding of printers
    • Important part of Moat – also have established distribution network
    • Q&A
      • Turnover?
        • Around 30% – less worry for them as they manage institutional money
  • Is it different in the post – financial crisis?
    • Some companies have had a level of trouble, but many they invest in have no debt
  • Experience with takeovers of companies you are in?
    • ½ dozen or so (not always a good deal)
  • Mistakes you’ve made?
    • In the sales area – part of the story that is not working/growing
  • Value vs. Growth?
    • No distinction – linked


Value Investor Conference: Omaha, Nebraska – May 4rd, 2012

Dustin Hunter, SunRift Capital Partners (

 (These notes are to the best of my recollection and trusty ink pen. Discrepancies are due to my error in understanding & transcribing.)