“If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”
- Warren Buffett
Sophon Microcap Atlas is a research platform built and maintained by Sophon Capital Research, a four-person investment, consulting, and research firm. You can read about our team members here.
We created the platform because writing about our investments added rigor to our due diligence process while we were doing consulting work for a family office. Over time, we realized that family offices, RIAs, small investment funds, and sophisticated retail investors could benefit from actionable, buy-side quality research at an affordable price.
Why Microcaps
We define microcaps as publicly traded companies with market capitalizations under $500 million. They are often overlooked and underfollowed, sitting outside the mandates of larger funds because of liquidity constraints and size. Sell-side research coverage in this space is minimal, which creates an opportunity for differentiated analysis.
Historically, microcaps have outperformed larger companies. The drivers of this outperformance are structural. There is limited coverage, smaller investor bases, and behavioral inefficiencies. Retail-dominated shareholder registers and thin liquidity create frequent price dislocations. For disciplined investors, these conditions create fertile ground for alpha generation.
In an otherwise efficient market, microcaps remain the anomaly.
Our Process and Edge
At Sophon we approach investing through a buy-side lens. We are professional investors who publish research because writing is an integral part of our investment practice. You can read more about that here. If we cannot clearly explain in writing why we like or dislike a company, we know our thinking is not sharp enough.
Our research emphasizes:
Primary work through interviews with management teams, former employees, vendors, and customers
First-principles analysis that combines bottoms-up modeling, channel checks, and detailed due diligence
Qualitative assessment of culture, incentives, capital allocation, and competitive moats
We value both what can be measured and what cannot.
Coverage and Portfolio
Over the next twelve months, we plan to evaluate about 500 companies, roughly 1 to 2 per day. Most will be passed over for lack of fit, interest, or adherence to our investment criteria, but we will still publish our research so investors can see the decision-making process.
Our coverage is structured as follows:
Coverage Reports: Up to about 150 companies we track actively in our universe
Brief Dives: Short notes on companies we evaluate but exclude from ongoing coverage
From this coverage universe, we maintain a long-only Microcap Best Ideas portfolio of 25 to 40 stocks. We share our trading activity with subscribers to provide full transparency.
What We Look For
We focus on two main types of opportunities:
Secular ROIC compounders trading at reasonable GARP multiples
Value-driven, event-driven special situations with a near-term catalyst
Who Reads Us
Our paying subscribers include portfolio managers at single-manager hedge funds, the former Head of Equities at one of the largest global multi-strategy hedge funds, and several family offices.
Closing
Liquidity in microcaps is a tax on indecision, but for investors who are willing to do the work, the rewards can be significant. Our mission with Sophon Microcap Atlas is to provide serious investors with rigorous research and actionable insights in the most inefficient segment of public markets.