Philosophy

Perritt Capital Management seeks to capture the benefits of the "small firm effect" through bottom-up, fundamental stock selection.

Our Investment Philosophy is Based on Twenty-plus Years of Experience Investing in MicroCap Companies over multiple market cycles

• The Small Firm Effect – smaller companies have historically provided higher absolute and risk-adjusted returns
• Investing in fundamentally and financially sound companies can enhance growth potential while decreasing downside risk
• Ensuring that reasonable valuations are paid for sound companies can contribute to long term returns
• Employing a well diversified portfolio reduces company and industry specific risk
• Active trading and market timing can reduce returns over the long-run

Perritt Capital Management seeks to benefit from the above philosophy by utilizing both in-house research and a network of external relationships to identify inefficiently priced companies. As a result of our twenty-plus years of experience investing in microcap equities we know that microcap investing requires non-traditional idea mining. The microcap universe includes companies with database records that are often incomplete or insufficient. In order to uncover potential investment ideas we have developed the following methods:

• The Perritt investment team generates internal ideas based on the assistance of internal screens as well as outside of the box methods.  An example of a company discovered due to outside the box idea generation is a company which emerged onto our radar due to that company's parts-supplier relationship with another portfolio holding.
• An external network of small company research boutiques, regional brokerage firms, peers, public relations firms, and CEOs and CFOs of small companies provides us with some of our most profitable ideas.  Examples of parties within this external network include boutique research firms such as Sidoti & Company, Roth Capital Partners and Noble Financial Group, as well as regional brokers such as Dougherty & Company, Barrington Capital Corp., and B. Riley & Co.  This network of external relationships has been developed over our twenty-plus years of experience investing in microcap companies.
• Small company executives are eager to reach out to our investment team.  In many instances, we are a small company's first institutional investor.  As a result, the investment team meets with 3-5 small company CEO's and CFO's in our office every week, which has provided us with a significant amount of profitable ideas over our twenty-plus year history.