Seven Canyons Advisors

Established in Q1 of 2006, Seven Canyons Advisors (SCA) is a Utah-based hedge fund manager. The firm was founded upon the conviction that the key to success in small-cap investing is having an experienced team and the intention to cap AUM. The firm believes there is a tipping point where growth in the team and AUM size becomes an impediment to successful investing in true small- and micro-cap stocks. SCA's research process starts with screens, which happen twice a month, by industry and geography. Every portfolio manager and analyst has a sector and geography assigned to ensure a routine process. The screen looks for sales growth consistently greater than peers, margin and ROA improvement, and a strong balance sheet. After a select list of companies is picked from the screen, it builds a financial model to understand its key metrics and then schedules a call with management. After the call, a formal recommendation is made and discussed by the team. SCA's grounds for selling a company can be categorized into two reasons. Either the investment thesis is broken (wrong about management, competitive advantage, or growth opportunity) or a better opportunity arises. This could mean a holding has been discovered and its expected return becomes less attractive. The firm aims to discover and own great companies before other fund managers. Screening is the backbone of the discovery process. When a company screens well, the firm practices traditional bottom-up deep due diligence. SCA visits companies onsite, dissects their financials, builds earnings models, and carefully monitors the companies. SCA builds relationships with management teams early when it most values it as a partner and remains in close contact with management for the duration of its investment.