Informed Momentum with Travis Prentice, CEO and CIO of EAM Investors
Jun 6, 2023
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Travis Prentice, CEO and CIO of EAM Investors, discusses the evolution of microcap investing and the ultra microcap strategy. They explore the impact of liquidity on investment strategies and the average hold time for investments. They also assess the importance of management and market cap in microcap investing, and where to find more information about EAM Investors.
Informed momentum combines fundamental and price-volume signals for effective microcap investing.
Regulatory changes like Regulation Fair Disclosure leveled the information playing field for microcap investors.
Supply chains shifting closer to home present opportunities for domestic-focused microcap companies.
Deep dives
The Impact of Human Activities on Biscayne Bay's Marine Wildlife
The podcast episode discusses the impact of human actions on the marine wildlife and water quality of Biscayne Bay in Miami-Dade County. Activities such as pet waste, fertilizer use, and littering can lead to environmental damage. These pollutants are washed into storm drains, canals, and waterways, ultimately affecting the health of the bay. While emphasizing the interconnectedness of human actions and the well-being of the bay, listeners are encouraged to adopt Biscayne Bay-friendly practices. The episode also briefly mentions the sponsor, Stream by AlphaSense, a platform that facilitates efficient information search for clients. As the podcast concludes, the host interviews Travis Prentis, CEO and CIO of EAM Investors, discussing his experience in the microcap investment sector.
The Evolution of Microcap Investing and Russell's Role
Travis Prentis explains his career experience in microcap investing, starting at Nicholas Applegate in the late 1990s. At that time, microcaps were typically referred to as mini-cap stocks. He discusses the role of Russell, a prominent index provider, in creating the microcap index. Russell collaborated with institutional asset managers like Nicholas Applegate to develop an index that accurately reflects the stocks and market caps of microcap companies. Prentis underscores the significance of systematic processes and informed momentum in microcap investing, highlighting the effectiveness of momentum signals in identifying potential investment opportunities.
The Challenges and Opportunities in Microcap Investing
The podcast delves into the challenges and opportunities in microcap investing. While acknowledging the recent underperformance of microcap stocks compared to larger companies, there is optimism about potential market recovery and liquidity returning to the asset class. The conversation explores the impact of regulatory changes like Regulation Fair Disclosure, which leveled the information playing field for investors. In today's private equity and venture capital-dominated landscape, where startups are increasingly funded in the private markets, the panelists discuss the need for talented microcap managers to uncover mispriced assets and capitalize on niche market opportunities.
The Role of Momentum in Microcap Investing
Travis Prentis emphasizes the significance of momentum in microcap investing. He explains that their investment approach, informed momentum, builds on the concept of momentum investing, combining fundamental and price-volume signals. The discussion highlights the importance of capturing favorable timing when a business is performing well and its stock price is gaining traction. Prentis underscores the need for efficient research, targeting specific securities that show momentum, and the importance of risk management in executing informed momentum strategies. It is noted that longer-term outperformance becomes less probable, highlighting the nuances of momentum investing and the potential rewards of early engagement.
The Future Outlook for Microcap Investing
The podcast concludes with a discussion on the future outlook for microcap investing. It mentions the cyclical nature of markets and the expectation of a recovery period, which could favor microcap stocks. The conversation touches on the impact of supply chains shifting closer to home and the potential opportunities for domestic-focused microcap companies. The panelists explore the challenges facing microcap investing, including fee compression and capacity constraints, but remain optimistic about the value that skilled microcap managers can bring to the table. The episode ends by encouraging listeners to explore EAM Investors' website for more research and insights on microcap investing.
My guest on the show today is Travis Prentice, CEO and CIO of EAM Investors. I was introduced to Travis by Doug Porter from Acuitas Investments (thank you Doug!) From Travis' time working at Managing Director and Portfolio Manager with Nicholas-Applegate Capital Management, experience with Russell in the midst of building out the MicroCap index, as well as EAM's strategy using what he describes "Informed Momentum", I think you're in for a treat.
Stream by AlphaSense, an expert interview transcript library that integrates AI-generated call summaries and NLP search technology so their clients can quickly pinpoint the most critical insights. Start your FREE trial on their website: https://streamrg.co/PMC
Planet MicroCap Podcast is on YouTube! All archived episodes and each new episode will be posted on the SNN Network YouTube channel. I’ve provided the link in the description if you’d like to subscribe. You’ll also get the chance to watch all our Video Interviews with management teams, educational panels from the conference, as well as expert commentary from some familiar guests on the podcast.
The Planet MicroCap Podcast is brought to you by SNN Incorporated, The Official MicroCap News Source, and the Planet MicroCap Review Magazine, the leading magazine in the MicroCap market.
You can Follow the Planet MicroCap Podcast on Twitter @BobbyKKraft
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