Annualized Return Of 152% In Buffett Style Small Caps

Updated on

Warren Buffett has said that even today, he could earn 50% or more a year if he had less money.

As strange as it may seem, having more than $110 billion of cash to invest at Berkshire Hathaway is actually a disadvantage to Buffett. With so much cash, he has to take big bets on large companies, and just can’t access the market’s best small-cap opportunities.

Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q4 hedge fund letters, conference, scoops etc

However, while Buffett has outgrown small caps, there are plenty of other highly experienced investors out there who are still able to hunt for small-cap value.

To find these managers and their ideas, ValueWalk set up the Hidden Value Stocks newsletter.

An annualized return of 152%

Hidden Value Stocks is a quarterly publication which profiles two hedge funds in each issue. Each of the hedge funds has a value slant and seeks to invest along similar lines as Buffett did when he set up his partnership.

One of the funds we profiled in the December 2018 issue was Chris McIntyre’s McIntyre Partnership. The value-focused firm picked Garrett Motion Inc. as one of its focus stocks for the magazine.

At the time of publication, the stock was trading at $12.30 (December 28, 2018) and today it is trading at $15.50for a total gain of 26% in just three. That’s an annualized return of 152%!

Here’s what Chris McIntyre had to say at the time of the interview:

“I came across Garrett as part of my event-driven strategy, where I look at most spins. After reading the Form 10, I was particularly drawn to the quality of the business and its above market growth prospects. Garrett has an exceptionally high return on tangible assets, industry-leading margins, and is a strong play on hybrid engines, which are set to grow share versus traditional combustion over the next few years.

I was also attracted to the technical setup of the spin. Garrett was a small-cap spin from a large-cap parent (Honeywell (HON)), and I reasoned there could be a lot of “forced” selling, which I believe has occurred.


Including the indemnity payments, which we’ll discuss in a second, I estimate Garrett will earn between $3 to $4 in FCF/share in 2019, excluding a severe auto downturn, yielding a 3x to 4x FCF multiple for Garrett. Further, I believe the indemnity payments will fall over time, which adds another $1 to $2 in FCF/share.”

Garrett is just one of the 40+ stocks Hidden Value Stocks has profiled since it launched at the beginning of last year.

Each newsletter subscriber not only receives a detailed investment thesis on each idea, but we also provide direct access to the funds profiled as well as their quarterly updates.

We have a special offer for new subscribers which expires on March 31.

You can sign up today for our yearly premium membership and cancel ANYTIME after our 5 day trial and pay ZERO also you will get our in depth studies on famous investors (several hundred dollars of value). Use code 15percent10 at checkout. Offer valid for next 10 subscribers or March 31, 2019, whichever comes first!

So, if you’re interested in signing up to Hidden Value Stocks, click here.

Have any questions? Contact us at [email protected] and we will be happy to help


Jacob Wolinsky and Rupert Hargreaves (both of ValueWalk)

HiddenValueStocks Inc., is jointly owned and operated by Rupert Hargreaves and Jacob Wolinsky in a 50/50 venture. We receive NO money from capital intros, advertisers, funds, etc. we are 100% devoted to finding what we consider among the best managers and profiling them as a win win for all sides. With that said you should see our disclaimer that notes among other things that we are not investment advisors nor is anything here a sell or buy recommendation.

Leave a Comment