Potomac Capital Partners L.P. is a nimble and opportunistic fund run by a manager who is also the largest shareholder in the Partnership. Our long-biased, absolute return, bottom-up approach to investing in equities, targets at least twenty percent (20%) annual net returns to investors. Our “Opportunistic Value” investment philosophy is predicated on the belief that equity markets can be inefficient in the short run, particularly in the small cap area. Potomac’s strategy is based n the common sense belief that Wall Street tends to overreact in both directions, creating opportunities for profitable investments and trades, both long and short.
We have a track record of nearly 16 years, during which time we have developed strong relationships with hundreds of companies and a deep understanding of their businesses. This experience allows for a thorough understanding of key investment issues, as well as the trading patterns relating to these securities, giving us high conviction in our investment decisions. In addtion, this history gives us the ability to detect changes in both industry and company-specific trends, as well as subtle changes in management tone or strategy.
We like low expectations on long positions and high expectations on short positions. We like company insiders buying shares in the open market. We like incentivized managements. We like overreactions, consolidating industries, strong brands, scalable business models, and recurring revenue. We like spin-offs or other situations where you may find selling pressure and pricing inefficiencies due to non-fundamental reasons. We like strong intellectual property and the protection of large cash balances, particularly in turnaround situations. We like the proverbial “free option”, where we are paying an attractive price for a business but getting a “free” look at either another opportunity or segment which could create significant value.