“Participating in this contest was a fulfilling experience that challenged me to connect with the rigorous theory of value investing I've learned in the classroom with its real-world applications by seasoned professionals. Mr. Veru's speech left me with a profound appreciation of how crucial the virtues of patience, conviction, and independent thinking are for value investors, and I look forward to continuing to refine my approach in the years ahead.” - Alyssa Choi
The investment landscape is constantly evolving, yet one principle remains timeless: opportunities often lie where few are looking. Mr. Dennison Veru, Chief Investment Officer at Palisade Capital Management, reinforced this during his talk, shedding light on the often-overlooked potential of small and SMID cap companies. His insights revealed how investors can uncover value in these underfollowed spaces, provided they have the right process and mindset.
WHY SMALL CAPS? UNDERSTANDING THE OPPORTUNITY
Mr. Veru's perspective on small cap investing is simple yet powerful: smaller companies offer more room for growth. He highlighted the small cap boom of the 1980s, when these companies emerged as legitimate asset class, and explain why they are compelling opportunities today.
Unlike large-cap stocks that are heavily analyzed, small caps tend to be underfollowed, allowing diligent investors to gain an edge. The key? Identifying businesses with strong management teams, a well-defined strategy, and a clear path to growth. As Mr. Veru noted, "When investing in small caps, you're not just buying into a business - you're investing in the culture of that company."
BETTING ON THE RIGHT MANAGEMENT
One of Mr. Veru's strongest convictions is that management quality is everything in small cap investing. unlike large corporations with layers of leadership, small and mid-sized companies rely heavily on the vision and execution of their management teams.
A strong management team knows how to deploy capital effectively, scale operations, and drive long-term shareholder value. Culture plays a pivotal role - companies that foster a mindset of efficiency, adaptability, and continuous improvement tend to outperform those that are complacent.
Mr. Veru warned against betting on the wrong leadership, sharing his experiences with investments where poor decision-making at the top eroded shareholder value. Mr. Veru left students with an insightful quote which harkens back to a a point that Dr. George Athanassakos often emphasizes: "The best management teams think in two dimensions: they operate efficiently while strategically managing their portfolio and investing for long-term growth."
THE PITFALLS OF VALUE TRAPS: GROWTH MATTERS
One of Mr. Veru's most insightful lessons came from his personal investment experience with Genesee & Wyoming pivoted through strategic acquisitions, growing from a struggling small cap into a multi-billion-dollar enterprise and one of the most successful investments in his career.
MASTERING EMOTIONS: INVESTING WITH DISCIPLINE
Perhaps the most valuable lesson from Mr. Veru's talk was the importance of managing emotions in investing. Successful investors develop processes to reassess their holdings objectively, avoiding the common mistake of fixating on underperforming stocks.
"When a stock declines, your instinct is to ask why it's going down," Veru said, "What you should be asking is whether you have a structured process to deal with it." His firm's approach? Assigning a fresh analyst to conduct a contrarian review, ensuring decisions are driven by logic rather than attachment.
Ultimately, investors should trust their instincts, not their emotions. investing has a perpetual learning curve, and those who can adapt, analyze, and act rationally will always have the upper hand.
LOOKING AHEAD: THE CASE FOR SMALL CAPS
With large-cap stocks dominating the market, Mr. Veru sees an important shift toward small and SMID cap companies. As interest rates stabilize and capital rotates away from overvalued tech giants, the environment could be primed for these overlooked opportunities to shine once again. Whether it is small and SMID caps, or emerging markets, as Dr. Athanassakos recently opined on in The Globe and Mail, for value investors willing to dig deeper into underfollowed opportunities, the rewards could be substantial.
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Alyssa Choi
Alyssa is a final-year HBA student at the Ivey Business School. Her passion for investing was sparked by her involvement in student investment clubs and stock pitch competitions, where she became fascinated with the field's intellectual challenge and continuous learning curve. She has previously completed internships in investment management, investing banking, and private equity across Toronto and New York, and will be pursuing a career in private equity upon graduation. Alyssa is excited to deepen her passion and understanding of value investing by contributing to the Ben Graham Centre for Value Investing.
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The views expressed in these blog posts are the opinions of their authors, and do not necessarily reflect those of the Centre. The intention of this blog is to provide a platform for current, past and upcoming HBA, MBA and Executive program value investing students to discuss value investing and related topics.
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