Investment Partners
S.W. Mitchell Capital
F/m Solutions From This Manager
About
Mutual Fund
Separately Managed Account
Upon Request
Manager Snapshot
Investment Focus
European Equities
Headquarters
London, England
Firm Founded
2005
Strategy Launch
2007
Firm Assets Under Management
$1.0 billion as of June 30, 2020
S.W. Mitchell Capital is a specialist European equities investment boutique based in London, England. Founded in 2005, S. W. Mitchell Capital manages approximately $1 billion (as of June 30, 2020) for a global clientele.
Manager Highlights:
Fundamental, bottom-up analysis of European equities
Concentrated, high-conviction, “best ideas” portfolios
Active research program of on-site and in-person meetings with companies and executives across Europe
Over 1,000 company meetings in 2019
Strategies Include:
Long only and long/short
Large/midcap and small cap
Pan European and continental Europe
Investment Team
Jamie Carter
Partner and Investment Manager
Investment Strategy
Pursuing profits from mispricings of European small cap stocks.
We believe there is unrecognized value in European small cap stocks, due to a structural lack of research, which is only becoming more acute due to increasing regulation.
Unrecognized Value and Potential "Double Alpha"
The unrecognized value may lead to substantial undervaluation or overvaluation. We believe this creates an opportunity for “double alpha,” or potential profits for both long and short positions. We believe we are among the few practitioners dedicated to investing long and short in European small cap stocks.
The Last Equity Frontier?
Average number of analysts covering equities: US vs Europe, Large Cap vs. Small Cap
(source: SWMC, JP Morgan)
The typical small cap stock in Europe may be covered by two analysts, compared to eight for US small caps. Large cap stocks worldwide may be covered by 15 to 20 or so analysts. This lack of research, we believe, creates an opportunity for research-driven portfolio management.
Us Large
VS
Europe Large
Us Small
VS
Europe Small
Investment Process
Management
We meet company managements regularly, and in person, since the team running the company can have a disproportionate effect on a company’s fortunes, better or worse.
Cash Flow
We analyze and assess company cash flows carefully, since companies generally live or die by the cash they do or do not generate. We believe that good companies generate excess cash and reinvest it wisely, and poor companies struggle as cash dissipates.
Catalysts
Among small caps, a catalyst is often necessary for the value of a company to be realized in its market price.
Our process generally leads us to identify
two types of companies:
“Compounders” and “Misunderstood”
Compounders
Compounders are companies that take the cash they generate and reinvest it at high returns into future growth. On the long side, we look for companies that consistently surpass market expectations with their ability to grow. On the short side we look for compounders “gone wrong.”
Misunderstood
Misunderstood companies cover a range of experiences. On the long side, such companies may be difficult to analyze, have made past mistakes, or have been through an industry downturn, all of which may obscure their intrinsic strengths. Misunderstood shorts also cover a range of experiences. Investors may have an overly optimistic view of company fundamentals, a company may be a “value trap,” or management may be undermining company prospects.
Compounders
Misunderstood
Compounders
(declining growth)
Misunderstood
Our process in action
Implementation of the strategy requires a disciplined, three-step process. We dedicate ourselves to this repeatable process over time on behalf of our investors:
In-Person Meetings
We meet with companies and management numerous times before initiating positions and while we hold a position.
Financial Analysis
We rigorously assess companies’ financial prospects with a particular focus on cash generation.
Identify Catalysts
Before we initiate a position, we ask what will drive the market to realize a mispricing.