Summary of SOR Q4 2022 Earnings Call

1Key Financial Results and Metrics

As of December 31, 2022, the Assets Under Management (AUM) for the FPA Queens Road Small Cap Value Fund was approximately $500 million.

In 2022, the Russell 2000 fell over 20%, while the Russell 2000 Value declined about 15%. In contrast, the Fund experienced a smaller decline of 9%, showcasing its downside protection.

2Strategic Updates and Business Highlights

The Fund aims to outperform the Russell 2000 Value over full market cycles with a disciplined value investing approach focused on small-cap companies with strong fundamentals and management.

The Fund is now available on major platforms including Fidelity, Schwab, and Vanguard, enhancing accessibility for investors.

Portfolio positioning remained stable, with no fundamental changes during the year. The Fund initiated six new positions and had four holdings acquired.

3Forward Guidance and Outlook

The management anticipates that small-cap stocks, particularly those with better valuations, will outperform large-cap stocks, especially coming out of a recession.

The Fund's long-term view remains focused on three to five years, allowing it to navigate short-term market noise effectively.

The investment team believes that the current setup for small-cap value is attractive, though not presenting "screaming bargains."

4Bad News, Challenges, or Points of Concern

The Fund's relative performance was negatively impacted by its lack of exposure to energy stocks, which saw significant gains in 2022.

Specific holdings, such as Synaptics, experienced substantial declines, with a noted 67% drop, although management remains optimistic about the company's fundamentals.

There are concerns regarding the potential for a recession, which could impact market performance, though the Fund is positioned to manage through such challenges.

5Notable Q&A Insights

Management emphasized the importance of maintaining a long-term investment perspective, avoiding the pitfalls of reacting to short-term market fluctuations.

The Fund's technology holdings (23% of the portfolio) significantly exceed the sector weights in the Russell 2000 Value, reflecting a strategic divergence from typical small-cap value investments.

The management expressed confidence in the ability of small-cap stocks to lead the recovery post-recession, citing historical trends that favor small-cap performance in such scenarios. Overall, the call highlighted a disciplined investment approach with a focus on quality and long-term growth, while acknowledging challenges and market dynamics that could impact future performance.