I have followed Aegis Financial for a long time, and they are exactly the sort of outfit I like to watch. This is a small, internally owned firm built around deep value in the parts of the market most investors avoid. They live in the land of small caps, cyclicals, commodity names, and assorted orphans of Wall Street. The firm dates back to the mid-1990s and has been managed for many years by Scott Barbee, who has spent decades doing one thing very well. He looks for companies that are trading at a fraction of what the underlying business and assets are worth, and he is patient enough to wait for the market to figure it out. The ownership structure is simple. The people making the decisions have their money alongside their clients and they care much more about long term results than gathering assets. That is exactly how I want a deep value shop to be set up.
When you read their material and then look at the 13F filings side by side, the story lines up. Aegis hunts where the big index funds and closet indexers do not. They want cheap assets, low expectations, and a solid margin of safety. That often leads them into energy, mining, and other capital intensive businesses where sentiment is usually awful at the point of maximum opportunity. The last two 13F filings show a very concentrated portfolio full of energy and resource names. They made a handful of meaningful changes in the third quarter. They opened a couple of new positions, added heavily to several existing names, trimmed a long standing winner, and completely exited one holding. Nothing about the activity looks like style drift. It looks like a disciplined value manager recycling capital from a maturing idea into opportunities where the discount to intrinsic value is still wide.
