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Midas Special Opportunities was recently highlighted in an article by Barbara Kollmeyer titled, This tiny mutual fund outperforms by backing the world’s best management teams. Many of the world’s largest companies have a distinct advantage over smaller companies, namely the ability to attract and retain the smartest people in the world. In the interview with MarketWatch, Midas Special Opportunities’ portfolio manager noted that believing in a company’s success is in part based on believing in the talent and work ethic of the people leading these companies. He said, “I feel pretty comfortable that, when my day ends, they’re probably still having late-night meetings and working out how to increase their competitiveness and what they have to offer.” A company can have a great product, but without competent stewardship, that company may not be able to realize that product’s full potential.
One measure that reflects great products and competent stewardship is free cash flow. Free cash flow is a metric that measures the amount of cash a company brings in over a reporting period and is then potentially available for reinvestment and growth. In other words, free cash flow can signify a company’s ability to compound growth, especially when combined with capable stewardship from great management teams.
Lastly, highlighted in the article is finding attractive entry points to initiate positions in great businesses. While many great businesses trade at elevated multiples, periods of widespread market fear, such as recent concerns over Artificial Intelligence disruption, can push the stock price of these strong companies to below their historic multiples. Buying when others are fearful is a well known investment cliché, yet in practice, can still be difficult for many investors. As difficult as it may be to buy certain companies when investor sentiment is low, remembering that these companies may be led by the best and brightest management teams can ease some of that worry.