NorthGate Asset Management

Equity markets systematically misprice businesses that are structurally sound but institutionally inconvenient — too small for large allocators, too unglamorous for growth-chasing mandates, too global for regionally siloed analysts.

Where the gap between perceived and intrinsic worth is wide enough, we let time do the work. Returns, when they come, come from growing earnings power rather than from a rising multiple. That is a slower mechanism, and a more durable one.

The dislocation is structural rather than cyclical. A decade of sell-side rationalisation gutted research coverage of smaller international companies, and the rise of passive allocation amplified the effect: businesses outside the major indices are underowned largely regardless of their quality.

This is not a mispricing waiting on a single catalyst. It is a standing feature of how research attention and capital are now allocated — which is why we treat it as a place to look, not a trade to time.

Most of the work is reading. We study a small number of businesses closely enough to form an independent estimate of what they are worth, and we act only when the price on offer is meaningfully below it.

Concentration follows from that discipline. A position exists because we understand the business and the price is wrong — not to fill out a sector, and not to make a list look balanced. The corollary is that most of our decisions are to do nothing.

We hold the approach to a testable standard rather than to unfalsifiable optimism. It depends on neglected businesses re-rating within a reasonable window of a normalised earnings cycle. If that re-rating persistently lags — as it did through the longest momentum-driven markets — then a long horizon becomes a liability rather than an advantage.

So we track it. We measure the realised gap between our estimates of intrinsic worth and the prices we actually exit at. A persistent, widening divergence across several closed positions is a signal to reassess the approach, not to insist on it.