We view stocks not just as random numbers on a screen but instead for what they are: an ownership interest in an actual business with an underlying value that does not depend on its share price. Because of this, we are different than most other managers who usually equate risk to volatility and partake in broad diversification.
Our Investment Philosophy
Every company in our portfolio is researched and tracked extensively. As a client you'll also be provided with quarterly letters. These letters will typically cover what we own and why we own it. We also try to make ourselves readily available to discuss any position in the portfolio with you - we're just a phone call or email away!
You’ll Know What You Own & Why You Own It
Due to advances in technology the stock market is mostly efficient today. Almost any earnings report, press release, or company transcript is a mere five-second Google search away. As Charlie Munger once said, "The first rule of fishing is to fish where the fish are." We believe small caps reside in mostly uncharted lakes with far fewer fishermen than the rest of the market.
Our Strategy, And Why We Focus On Small Caps
Our Repeatable Investment Process
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We aren't seeking out the cheapest or most thought-provoking ideas. Instead, we are usually looking for great companies we'd like to own at a certain price. Ideas are sourced from our network, our watchlist, blogs/forums, screeners, etc.
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Once an idea is identified, time is spent researching it extensively. This process usually includes speaking to management, former employees, and industry experts. Our goal at this step in our process is to "kill" the idea so we can move on to something else. Most ideas are scrapped in the first hour or so, but some go on much longer just to get scrapped later.
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If an idea makes it past our rigorous research process, we then build a simple model with a forecast of the future. We are flexible and will utilize different valuation methods for each company to reach our reasonable estimate of the business's value.
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Depending on our other opportunities and current investments at that time (our opportunity cost), the idea is either added to our portfolio or thrown into our watchlist to monitor as a potential position at the right price.
We employ an extensive and repeatable research process that helps us to identify great opportunities and businesses while avoiding unnecessary risks and mistakes.
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Our favorite holding period is forever, but we usually underwrite for 3-year returns of 25% annually. We are "hold forever" investors only when the market and the businesses we own allow us to be.
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We focus on business risk, not the academic definition of risk (volatility). Because of this, our portfolio's monthly/quarterly/annual returns don't matter much to us. We are long-term investors optimizing for maximum total returns while avoiding unnecessary risk.
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Investments usually fall into one of four buckets for position sizing based on total AUM.
1. High Conviction names at 10%-15%+ of AUM - These are our best ideas that pose the most favorable risk/reward.
2. Conviction/Core names at 5%-10% of AUM - These are our close runners-up that have the potential to grow into the high conviction category.
3. Special Situations capped at 6% of AUM - These are special situations or positions that don’t fall into bucket one or two.
4. Starter/Non-Core positions at 1%-4% of AUM
All Atai Capital client portfolios are in the same long-only strategy that utilizes no leverage, targets 10-15 names, and targets a cash allocation. We have no interest in derivatives or shorting and will hold cash if no compelling opportunities exist.
How We Handle Portfolio & Risk Management
Our goal, like many other managers, is to preserve and grow your wealth over the long term. However, we believe our approach to be differentiated when compared to most other managers. Our ambition is to outperform our relevant indexes over the long term - these two aren't mutually exclusive, and only time will tell if we can achieve both in tandem.
Atai Capital will close to new investors at $50M in AUM.
We believe that in order to better achieve our goal & ambition that limiting our AUM is necessary to protect our clients’ growth runway and maintain our large investible universe.
Our Goal And Ambition
