Small Cap & Speclal SlLuaLlons 8esearch

Þ a a e | !
DL |

!anuarv 18, 2011

1he Small Cap and Speclal SlLuaLlons 8esearch reporL offers value focused, ln-depLh
fundamenLal analvsls of securlLles we belleve offer favorable rlsk-reward proflles. We seek Lo
ldenLlfv and explolL markeL lnefflclencles Lhrouah our rlaorous due dlllaence process, and
applv Lechnlcal lndlcaLors wlLh a aoal Lo ldeallze Lrade execuLlon.
Whlle knowlna how Lo value buslnesses ls essenLlal for lnvesLlna, a crlLlcal componenL ln Lhe
lnvesLmenL process lnvolves knowlna where Lo look for opporLunlLles. We belleve our
coveraae unlverse conLalns ample opporLunlLv for capable lnvesLors.
1. #$%&&"'%("7 Companles wlLh markeL caplLallzaLlon of less Lhan $2 bllllon, lncludlna Lhose
Lradlna on C1C Lxchanaes. We search for unloved, underfollowed, and/or
mlsundersLood securlLles. Cur ldeal opporLunlLv has an lmmedlaLe or near Lerm caLalvsL
for reallzaLlon of underlvlna value.

2. #(+,-%&"#-./%.-0)1"7 1he underlvlna Lheme Lo mosL of Lhese lnvesLmenLs ls chanae.
SomeLhlna ouL of Lhe ordlnarv course of buslness ls Laklna place LhaL creaLes an
opporLunlLv. 1he deLalls of each slLuaLlon varv, buL normallv lnsLlLuLlonal consLralnLs,
llllquldlLv, complexlLv and lnformaLlonal lnefflclencv creaLe value opporLunlLv. 1vplcal
Speclal SlLuaLlons lnvesLmenLs occur ln Lhe followlna LransacLlons:
• Spln-offs
• 8ankrupLcles
• 8esLrucLurlnas
• 8lahLs Cfferlnas
• Meraer SecurlLles (Cv8's, eLc.)
• 8ecaplLallzaLlons
Small Cap & Special Situations Research"

Small Cap & Speclal SlLuaLlons 8esearch
Þ a a e | 8
DL |

!anuarv 18, 2011
Cur research process ls a boLLom-up, value based approach. CreaLlve ldea flow reflnes our
broad unlverse lnLo a baskeL of workable leads whlch are Lhen meL wlLh hard-nosed skepLlclsm
and analvLlcal rlaor.
1. ldea llow
a. ÞroprleLarv fundamenLal screens,
b. 1araeLed quallLaLlve screens Lhrouah SLC flllnas,
c. unusual AcLlvlLv: lndex reconsLlLuLlon, dellsLlna, and lnslder acLlvlLv,
d. ueveloplna Lrends.

2. Analvsls
a. llnanclal SLaLemenL Analvsls, emphaslzlna asseL quallLv and earnlnas reporLed vs.
Lhe Lrue economlc value,
b. Þeer Croup and lndusLrv Analvsls,
c. Companv & LxecuLlve PlsLorv,
d. Cn SlLe/Companv vlslLs when warranLed,
e. 1echnlcal Analvsls Lo opLlmlze Llmlna.

lrom unproven buslness models Lo unfavorable caplLal ralses, manv Lraders ouLrlahL refuse Lo
lnvesLlaaLe securlLles llke Lhe ones we cover. 1hls broad-brush Lhlnklna ofLen leads Lo ouLslzed
rlsk premlum, and Lherefore value. ln seeklna observable facLs and followlna loalcal reasonlna,
our research alms Lo mlLlaaLe rlsk and ldenLlfv underappreclaLed value.
We wlll dellver sLrenuouslv researched oplnlons, and formulaLe ldeas on how Lo Lrade Lhe
names based on our comblned experlence. 1he expecLaLlon for hlah volaLlllLv musL be
appreclaLed, and lL musL be noLed LhaL ouLslzed prlce acLlon works boLh wavs. ÞaLlence,
poslLlon slzlna, Llmlna, and experlence cannoL be lanored.

Small Cap & Speclal SlLuaLlons 8esearch
Þ a a e | ;
DL |

!anuarv 18, 2011
Cur producL lnherenLlv deals ln lnsLrumenLs whose prlces can be moved bv relaLlvelv small
sums. noL onlv wlll we ofLen parLlclpaLe ln Lhe securlLles covered as a maLLer of LrusL ln our
own svsLem, we mav Lrade ln Lhem, as well. We vlew eLhlcs as an lmperaLlve, and Lherefore
wlll noL refraln from dlscloslna poslLlons aL Lhe Llme of wrlLlna buL Lhere can be no expecLaLlon
LhaL prompL, or even Llmelv noLlce wlll be alven when chooslna Lo sell. We vlew sLock
ownershlp and Lradlna as an lndlvldual maLLer, noL onlv on our parL, buL on vours. lf a
slLuaLlon arlses LhaL chanaes our oplnlon of a alven securlLv LhaL oplnlon wlll be dlsLrlbuLed as
soon as ls pracLlcable. We recelve compensaLlon ln connecLlon wlLh Lhe publlcaLlon of Lhls
newsleLLer excluslvelv ln Lhe form of fees charaed Lo cllenLs.
kvle works ln CorporaLe llnance for a lorLune 300 companv. CuLslde of hls professlonal
acLlvlLles he devoLes Lhe ma[orlLv of hls Llme Lo manaalna hls own lnvesLmenLs ln Lhe small
cap/speclal slLuaLlons space.
upon araduaLlna from colleae Chrls spenL almosL a decade ln consLrucLlon manaaemenL wlLh
responslblllLles lncludlna wrlLlna conLracLs, creaLlna schedules and budaeLs, and cllenL
lnLerface for pro[ecL values ranalna from neallalble Lo Lens of mllllons. 8ealnnlna ln 2007, he
beaan Lo Lake ownershlp of a modesL reLlremenL porLfollo, and separaLe cash accounL wlLh Lhe
recoanlLlon LhaL asseL manaaemenL bealns and ends wlLh Lhe asseL holder. AfLer exceedlnalv
proflLable Lradlna Lhrouah Lhe down-Lurn and followlna rebound he lefL Lhe consLrucLlon
lndusLrv ln Lhe Sprlna of 2010 Lo dedlcaLe more focus Lo hls lona Lerm research and more Llme
Lo hls shorLer Lerm lnvesLmenL sLraLeales.


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