Intrepid International Fund
Investment Objective: The primary investment objective of the Intrepid International Fund is long-term capital appreciation.
Investment Philosophy >>
Our goal is to provide positive absolute returns and relative outperformance against the benchmark index over a full market cycle.
- We seek to protect our clients’ capital on the downside while participating in periods of market appreciation.
- We are focused on downside risk and will invest only when strict valuation criteria are met.
- While much of the investment industry treats performance like a football game, measured in quarters, we view investing as a marathon of emotional discipline encompassing years of investment returns in favorable and unfavorable climates.
Investment Strategy >>
We focus on international companies that are not efficiently priced by the market.
- To find these companies, we search for those that can be valued with a high degree of confidence, generate consistent free cash flow, have strong balance sheets, and are run by a proven management team with a solid record of capital allocation. Often, the stocks of these businesses are suffering from issues that we determine to be temporary.
- We employ a long-term investment outlook focused on absolute value.
- Our process is designed to capitalize on fear, volatility, and the inevitable investment bargains they generate.
- We are content to hold cash if we cannot identify enough undervalued opportunities to be fully invested.
Portfolio Construction >>
We manage relatively concentrated portfolios that allow us to potentially benefit from individual stock selection while providing adequate diversification.
- We generally own equity securities of approximately 15 to 50 different companies in the portfolio. Typically, our initial position size will be around 2% of Fund assets, and we will add to holdings as we become more comfortable with the company or if the share price declines without an equivalent decline in fundamentals, affording us an opportunity to purchase the name at a larger discount.
- Our maximum position weight at purchase is 5%, and position size is dictated by the discount to intrinsic value and the quality of the holding.
- Holdings are typically exited as their share price reaches intrinsic value.
Risk Control >>
Our definition of risk is losing money. We try to control risk by ensuring that we understand a business's operating characteristics, cash flows, balance sheet, and the motivations of management. Then, we wait to buy shares until we believe there is at least a 20% discount to our fair value estimate.
- Risk is controlled through two key mechanisms.
- First, our investment process includes elements specifically designed to assess the risk associated with each security, including an evaluation of a company’s operational and financial risk. We strive to avoid companies with both kinds of risk.
- Position size is the second element we employ to control risk, and we will limit position sizes based on the risk profile presented by a prospective investment.
- While we do not build positions based on sector/industry mandates, as we feel such requirements actually add risk to a portfolio, we do limit our exposure by not investing more than 6% in any one security. In conjunction with our valuation discipline, this limitation has historically limited our sector exposures and created a portfolio with an attractive risk-adjusted return profile.
Mutual fund investing involves risk. Principal loss is possible.
The Funds' investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read it carefully before investing. A hard copy of the prospectus can be requested by calling 866-996-FUND (3863).
Intrepid Capital Management Funds are distributed by Quasar Distributors, LLC.
The Fund is subject to special risks including volatility due to investments in smaller companies, which involve additional risks such as limited liquidity and greater volatility. The Fund is considered non-diversified as a result of limiting its holdings to a relatively small number of positions and may be more exposed to individual stock volatility than a diversified fund. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although lack of liquidity in an ETF could result in it being more volatile than the underlying portfolio of securities. ADRs may be subject to some of the same risks as direct investment in foreign companies, which includes international trade, currency, political, regulatory and diplomatic risks.
Diversification does not guarantee a profit or protect from loss in a declining market.
Free Cash Flow measures the cash generating capability of a company by subtracting capital expenditures from cash flow from operations.
