Opportunities and Significant Upside in Smaller-Cap Stocks: A Wall Street Transcript Interview with Steve Wilson, CFA, Founder, Chief Investment Officer, and Analyst Manager for Lapides Asset Management LLC

Wall Street Transcript

67 WALL STREET, New York - December 30, 2013 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small Cap Investing - Upside in Small-Cap Stocks - Contrarian Approach to Investing - Quality of Business - Investing in Tangible Assets - Value in Emerging Markets - Cash-Flow-Oriented Global Companies - Turnaround Situations in Small and Micro Caps

Companies include: Pitney Bowes Inc. (PBI), International Business Machine (IBM), VeriFone Holdings Inc. (PAY), Wal-Mart Stores Inc. (WMT)

In the following excerpt from the Investing Strategies Report, an experienced small cap portfolio manager discusses his methodology and top picks for 2014:

TWST: Lapides is a money manager with a focus on smaller-cap stocks. Tell us a bit about why you've chosen that as your focus, and anything else you'd like to add by way of introducing yourself to readers.

Mr. Wilson: I've spent the last 32 years focused on smaller-cap stocks, because it's truly an area that's less well-researched. You find greater opportunities and more significant upside, because they are not on the radar screen of most investors. These are companies that have greater control over their own destiny, that are really not beholden to what's going on in the macro world to the same extent that their larger brethren are, and you can really get deep with the companies, get to know management. They are much more accessible and really understand their business, and that's critical because we are long-term investors and our approach is contrarian in nature.

We are looking at businesses that have often had a period of struggles, that are currently operating under a dark cloud of some sort; that's when the valuations are most depressed and where our research is going to add the most value. A smaller-cap company that falls between the cracks gives you a two-sided advantage: significant upside because expectations are low, and more limited downside because they are not being trumpeted by everybody else.

You want the right combination of a formerly successful company that you can buy low and ultimately can attain or re-attain the characteristics of a growth business and be valued as such. That's really the universe that we are totally focused on.

TWST: You are about to board a plane for China; I imagine this is a research trip. Would you talk about how your in-house research is an integral part of your investment strategy, and what makes your research efforts different from others?

Mr. Wilson: What's critical in my research efforts is to understand the business as best as I can from all possible angles. Too many investors put so much of their energy into creating the most elaborate financial model to figure out if they're going to be a penny better or a penny worse than what everybody else thinks for the next quarter. We will leave that exercise for others to do. There is way too much emphasis on what companies report quarter by quarter.

What I want to do is understand what makes the business tick, and the best way to do that is to spend my time out in the field, the so-called trenches where the world of business is battled out every day. So I spend an inordinate amount of my time on the road, meeting with companies, and I do that around the world. As you just cited, I'm heading off to China for a couple of weeks...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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