U.S. Markets close in 4 hrs 7 mins

Ask Arquitos Capital's Steven Kiel Your Investing Question for GuruFocus Q&A

- By Holly LaFon

Steven Kiel, founder of Arquitos Capital, will speak at the GuruFocus Value Investing Conference in May alongside investors such as Mario Gabelli (Trades, Portfolio), Francisco Garcia Parames (Trades, Portfolio) and Chuck Royce (Trades, Portfolio). But ahead of that, he is taking GuruFocus reader questions for a Q&A.


To submit your question for Steve, simply post it in the comments section below. We'll send them to him and publish the responses soon.

About Steve and Arquitos

Since starting New York-based Arquitos in 2012, Steve has achieved returned of 21.3% annually after fees, beating the market's return by almost 10% per year. Before launching his hedge fund, he had a career as an attorney and served in the Army Reserves.

Investing approach

Arquitos focuses 12 to 18 holdings of primarily North American companies within its concentrated portfolios. Because of his emphasis on conviction, the top five holdings often account for up to 75% of the fund. The typical holding period is three to five years, or longer.

As a value investor, Steve seeks stocks that trade below their intrinsic value. Key items he requires for investment companies are strong balance sheets with low debt and "incentive alignment," meaning high insider ownership, share repurchases and shareholder-friendly policies. He also likes companies that have strong balance sheets but that are transitioning into becoming strong free cash flow generators.

Avoiding any leverage, a misaligned investor base and unsuitable temperament help him minimize risk.

"Successful investing and risk management is overwhelmingly a psychological exercise where self-awareness, intellectual honesty and an understanding of and interest in avoiding biases is required," he said in an investor presentation.

Holdings

Arquitos prides itself in investing in names that are not well known. One of Kiel's primary ideas of 2019 is investment company Westaim Corp. (WED.V), a specialty property and casualty company that is up for sale. In a recent presentation, Kiel noted its 20% discount to book value, shareholder friendly culture and experienced management. Read more about it here.

Steve also likes MMA Capital (MMAC), a niche asset manager trading at 70% of book value. He has praised its high insider ownership, consistent share buybacks and significant tax loss carryforwards. In December, he said he anticipated a 40.4% rise in the stock within six months to a year.

Questions

Don't forget to ask Steve your question by posting it in the comments section below!

This article first appeared on GuruFocus.