At Sonoma Capital Management, we seek achieve superior risk-adjusted returns through the implementation of several carefully selected investment strategies, including the strategies discussed below.
Short-Term Trading. This strategy seeks to take advantage of short-term swings in the stock prices of various securities resulting from market volatility, news or other events, order flow, emotion, or market activity that appears not to be based on a company’s underlying fundamentals.
Value Oriented Investments. This strategy targets the securities of issuers that appear undervalued, which will be identified through fundamental or other research.
Risk Arbitrage. This strategy focuses on long or short investments in debt or equity securities of companies that are or may be the target or acquirer in a merger or acquisition.
Mutual Thrifts, Insurance Companies and other Cooperative Institutions. This strategy involves investments in equity or debt securities of formerly mutually owned companies and occasionally includes the opening of bank accounts or purchasing of insurance policies in mutual savings banks, credit unions or mutual insurance companies.
Capital Structure Arbitrage. This strategy seeks to take advantage of individual pricing disparities in a particular company’s debt or equity securities that, when taken as a whole, do not properly reflect the expected relationship between those classes of securities. This goal is achieved through long or short positions in various equity classes, debt vs. equity “hedges,” or positions in other parts of the capital structure that provide a superior risk/reward balance.
Overvalued Companies and Short Selling. This strategy involves selling short one or more classes of securities of an issuer who appears to be overvalued for any reason, such as speculative excess, deteriorating company or industry fundamentals and excessive promotion.
Special Situations and Event Driven Investments. This strategy seeks special situation and event-driven investments, including, but not limited to, Dutch auction tenders, spin-offs, mergers, acquisitions, divestitures, tender offers, leveraged and other recapitalizations. Generally, the strategy aims to take advantage of situations where the market has failed to realize the intrinsic or relative value of a security because of a lack of research coverage, proposed legislation, material litigation, a failed takeover attempt, misreading or confusion surrounding a particular news item, or other event that has caused a temporary pricing disparity to exist.
Carve-Out Investments. This strategy seeks the securities of issuers that are undervalued because the market price of those securities does not properly reflect the issuers’ ownership of investments in other public or private companies. Such investments could include making a long investment in the parent company of a publicly traded subsidiary, while simultaneously selling short the equity or equity-related securities of the subsidiary or a related company. The pricing disparities contemplated under this strategy may be caused by various factors, such as the euphoria of a rising stock market or the willingness of investors and day traders to devour initial public offerings.
Convertible, Warrant and Option Arbitrage. This strategy focuses on convertible equity or debt securities of public and private issuers as a means of establishing positions designed to take advantage of pricing disparities.
Distressed Debt and Bankruptcy Investing. This strategy seeks to invest in the debt, equity or claims of private and public issuers that are financially troubled or filing for, or emerging from, reorganization. The strategy may, from time to time, involve commencing or participating in litigation designed to enhance or protect Sonoma’s investments.
Initial Public Offerings. This strategy involves investing in initial public offerings that appear likely to be inefficiently priced.