Mother-and-Daughter Fund-Manager Team Scores With Micro Caps
This unique managerial pair invest in tiny, growing companies that trade at reasonable prices.
Early this year, the managers of Paradigm Micro Cap (PVIVX) faced a tough choice: what to do about circuit board maker TTM Technologies, a big holding. The stock had dipped below $5, off more than 50% from its 2015 high. After speaking with TTM officials and reviewing the firm’s finances, the choice was clear: The managers bought more shares. It was a smart move; the stock has soared 140% from its low.
The decision wasn’t a surprising one for Candace and Amelia Weir, likely the only mother-daughter manager team in the fund business. TTM’s plunge coincided with a broad market sell-off. When the Weirs concluded that the stock’s fall was more a result of market forces than a change in TTM’s prospects, they saw a chance to buy a stock they liked at a fire-sale price. (For more on the Weirs, see What This Mother-Daughter Fund-Manager Team Can Teach Us About Investing).
The Weirs focus on companies with market values of less than $1.4 billion. They invest mainly in technology, industrial, retail and health care stocks, seeking growing firms that trade at fair prices, generate a lot of free cash flow (cash profits after capital outlays) and carry little debt. Micro caps carry above-average risk. In early October, six of Paradigm’s 41 holdings traded for less than $5, putting them in penny-stock territory. Over the past three years, the fund has been 26% more volatile than the average small-company stock fund.