In this article we will share the 10 best small-cap stocks to buy according to small-cap-focused hedge fund Minerva Advisors.
Established in the fourth quarter of 2002, Minerva Advisors, based in Pennsylvania, is an activist hedge fund managed by David Cohen. The firm specializes in equity investments, concentrating on small-cap and micro-cap value companies listed in the United States. Minerva Advisors employs a variety of investment strategies, including long bias, market dislocation exploitation, event-driven approaches, long-short strategies, thrift conversions, merger arbitrage, and capital structure arbitrage. From time to time, David Cohen launches activist campaigns targeting small portfolio companies in which Minerva Advisors holds relatively large equity stakes. One such example is the newspaper publisher A. H. Belo which was trading at around $4 per share when the stock had $2.58 in net cash per share on its balance sheet as well as other assets with a combined value of more than $4, hence valuing the company’s publishing business at zero.
David P. Cohen holds dual roles as President and Chief Compliance Officer at Minerva Advisors LLC, where he manages investment portfolios and research activities. His expertise lies in investing in small-cap and micro-cap companies, both in the U.S. and internationally, focusing particularly on the industrial and financial sectors. Cohen is the sole managing member of Minerva.
A finance executive tapping away on a digital tablet, demonstrating the company’s digital innovation.
Before his tenure at Minerva, Mr. Cohen founded and served as President of Athena Capital Management, Inc. from 1988 to 2011. Athena later merged with Minerva Advisors. His career began as a research analyst and portfolio manager at a Philadelphia-based investment partnership from 1984 to 1988. Beyond his professional roles, Cohen has extensive board experience. He has been a member of the board of directors at CampusWorks, Inc. since 2011 and previously served on the board of Penn-America Group, a publicly held insurance company, from 1993 to 1997. Cohen earned his undergraduate degree from Haverford College, grounding his career in a solid academic foundation.
Minerva Advisors manages nearly $300 million in discretionary assets, as reported in their Form ADV filed in March 2024. The fund serves 7 clients and recently disclosed holdings of $163 million in managed 13F securities for Q1 2024, with its top ten holdings making up 62.67% of the portfolio.
Our Methodology
The stocks discussed in this article are part of Minerva Advisors’ investment portfolio as of the first quarter of 2024. To provide readers with comprehensive insights into these companies, we’ve included analyst ratings and other pertinent details. Additionally, we highlight the number of hedge fund investors involved in each company. Why focus on the stocks that hedge funds invest in? Our research shows that mimicking the top picks of the best hedge funds can lead to market-beating returns. Our quarterly newsletter’s strategy, which selects 14 small-cap and large-cap stocks each quarter, has returned 275% since May 2014, outperforming its benchmark by 150 percentage points. (see more details here)
10. Saga Communications, Inc. (NYSE:SGA)
Number of Hedge Fund Holders: 4
Regulatory filings reveal that Minerva Advisors owned 233,041 shares of Saga Communications, Inc. (NYSE:SGA) at the end of the first quarter of 2024. These shares were valued at $5,199,145, making up 3.18% of the hedge fund’s overall portfolio. For the recent quarter, Saga Communications, Inc. (NYSE:SGA)’s net revenue decreased by 2.5%, falling to $24.7 million from $25.3 million in the previous year.
In their Q1 2024 earnings call, Saga Communications, Inc. (NYSE:SGA)’s CEO Chris Forgy emphasized the urgent need for important changes due to increasing bad debt expenses and a rise in overdue receivables:
“What would you do if I told you, I have an app that during any given week reaches 91% of all adults 18 plus in the U.S. reaches a diverse audience and provides targetability, both digitally and over the air, is both hyperlocal and national simultaneously delivers the most efficient CPMs anywhere, out delivers all other streaming services like Amazon, Apple Music, YouTube, Spotify satellite radio combined, provides the greatest ROI ad spend ever and does all of these things right now. It’s called radio. Radio isn’t broken. It’s just slowing down, maybe a little misunderstood. And Saga is not big enough in order to have the scale to speed radio back up for the entire sector, but we can speed it up for Saga. And the toughest time to change is not when something is broken, but when something starts to slow down and radio is slowing down…
At best radio gets 7% of the media spend pie. The customers we deal with every single day, the ones that have “great relationships” with us spend over 60% of their money or they’re ad budget with digital products and providers. And I’m not talking about web development, but digital advertising. So for the most part, we as an industry have not yet earned their trust enough to have the 60% discussion with them yet. The majority of our advertisers trust us with just 7% of that discussion. The fact is, this is a bit shocking, but the fact is, in my opinion, all of our 7% is at risk. I stated many times before Saga’s objective is not to become a digital company, but to save and protect the 7%, we have to provide the skills to our sellers necessary to qualify us to have a 60% discussion with our customers, plus the 7% and do it all the time.”