Investment Strategy
A Long-Term Perspective
Over the long run, equity markets tend to behave efficiently, meaning that stock prices ultimately converge with the true economic value of the underlying businesses. This intrinsic value is determined by a company’s fundamental performance and is calculated by discounting its expected future earnings to their present value.
Margin of Safety
At the heart of value investing, a philosophy developed in the 1930s by Benjamin Graham and later refined by Warren Buffett, is the pursuit of high-quality companies trading at a significant discount to their intrinsic value. Graham called this gap the “Margin of Safety” ,a buffer that protects investors from downside risk while allowing for meaningful upside over time.
The Courage to Think Differently
Value investors often adopt a contrarian mindset, seeking out companies that are overlooked, out of favor, or facing temporary challenges. These might be businesses in cyclical downturns or going through short-term setbacks that cloud their long-term potential. Precisely in these neglected corners of the market lie some of the most rewarding long-term investment opportunities.
Independent, In-Depth Research
Estimating a company’s intrinsic value begins with asking the right questions: What products or services will drive its profitability over the next 5 to 10 years? Is the market it operates in growing, and at what pace? Answering these and many other questions requires a disciplined, independent research process. Only through deep analysis can we build the conviction needed to invest with confidence and clarity.
Multidisciplinary Approach
KAI Capital’s research team brings together a rare blend of expertise , combining analysts with backgrounds in mechanical engineering, energy, and technology (including alumni of Unit 8200) alongside professionals with deep experience in financial analysis and capital markets. This diverse foundation enhances our ability to evaluate businesses from multiple angles and uncover overlooked opportunities.
Geographic and Sectoral Diversification
The Fund’s investments are diversified with the aim of achieving the lowest possible correlation between them, thereby reducing the Fund's risk level and volatility:
Geographically: The investment portfolio is typically allocated between the USA (50%), Europe (25%), and Israel (25%). This allocation may change from time to time based on the best investment opportunities available at any given time.
By Sector: The Fund’s investments are spread across a wide range of industries that have no direct interdependence.
Long-Biased Equity
Kai Capital’s investment portfolio is composed of long positions in 15 to 20 companies, with each holding typically representing 4% to 8% of the Fund's total assets.
When appropriate opportunities arise, the Fund hedges its investments through short selling or derivatives. However, the use of these instruments generally accounts for only a small percentage of the Fund’s total Net Asset Value (NAV).
Market Capitalization (Market Cap)
The Fund invests across the entire market capitalization spectrum, ranging from small-cap companies valued at hundreds of millions of dollars to the largest global corporations.
However, the majority of the Fund’s research resources are dedicated to small and mid-cap companies (with a market cap of up to $10 billion). These companies often fly "under the radar" of major institutional investors, offering a higher probability of identifying attractive and undervalued investment opportunities.
Exposure Limits
The Fund adheres to strict exposure management guidelines to ensure risk control:
Single Issuer Concentration: Exposure to any single issuer will not exceed 15% of the Fund's total assets.
Gross Exposure: The Fund’s total gross exposure will be capped at 120% of its Net Asset Value (NAV).
Short & Derivatives Limit: Aggregate exposure to short sales and derivatives will not exceed 20% of the Fund's total assets.
Holding Period & Investment Horizon
Kai Capital invests in companies trading at a significant discount to their intrinsic value. The Fund exits these positions once this valuation gap closes and the market price converges with the company’s fair value. This disciplined approach typically results in an investment horizon of 2 to 5 years per company.