02.12.2014

Emerging Manager Happy to Stay Small

02.12.2014
Terry Flanagan

Mark Spiegel, managing member of Stanphyl Capital, is an emerging manager, and he’s happy to stay that way. Since inception in June 2011, Stanphyl’s returns have been solid. Last year, it racked up a 56% return using a fundamentally-driven investment strategy.

“My plan is to cap this fund at $50 million,” Spiegel said. “Most of the money I make is in underfollowed, fundamentally sound small companies. I might take a big position in a company with a $50 million market cap and it might triple on me, so that’s how I make money for my investors. But I know I wouldn’t be able to rack up these returns if I was running a $500 million fund.”
Stanphyl has outsourced its fund accounting and administration functions, freeing Spiegel to focus on what he does best: scanning the markets.

Prior to forming Stanphyl in 2011, Spiegel worked on Wall Street financing microcap public companies via private placement transactions in companies with market caps of $50 million to $500 million. He’s an inveterate reader of all things financial: fundamental stock screens, economic statistics, SEC filings, and Seeking Alpha, to which he contributes frequently.

Spiegel characterizes his investment strategy as extremely fundamental. “My average hold period is six months to a couple of year,” he said. “I do almost no short-term trading. I do fundamental scans and technical scans. Sometimes a technical scan will pick up a fundamental development in a company. I take concentrated positions, and I spend a lot of time reading and watching, and not a lot of time trading.”

For example, Spiegel is currently long on a medical device company, and long on a Canadian technology company that services the fluids sector. “I’m working in a very inefficient market,” he said. “I almost never have more than 10 positions at a time.”

The Canadian company is selling at nine time earnings net of cash; Spiegel bought it at five times earnings net of cash.

The medical device company has more than doubled in value. “They are doing $35 million in revenue, and they have $14 million of SG&A, so they can easily be bought and turned hugely profitable just by slashing SG&A,” Spiegel said. “Biotech is a huge bubble; I’ve got four or five biotech shorts. My shorts tend to be large caps; my longs tend to be microcaps.”

Related articles

  1. Dalio founded the hedge fund 47 years ago.

  2. A Web of Interdependencies

    Virtual forum enables senior execs to gauge sentiment and benchmark approaches to common challenges.

  3. Deutsche Borse-LSE Merger in Focus

    SkyBridge will use some proceeds to buy $40m in cryptocurrency to hold on its corporate balance sheet.

  4. Assets in global ETFs were $5 trillion larger than assets invested in global hedge funds at the end of Q2.

  5. MiFID II to Boost Automation

    More everyday tasks can be automated, alternative investment management industry report says.