“Once you adopt a value-investment strategy, any other investment behaviour starts to seem like gambling.”
—Seth Klarman

Executive Summary

Ironwood Capital Allocation Partners (Ironwood) is a value oriented hedge fund with an investing style inspired by Charlie Munger. Ironwood was founded by Nathan Reid in January of 2013 with the initial name of Bridge Reid Fund. Ironwood’s investment focus centers on small and micro-cap companies. Ironwood’s portfolio consists of long-term, high-rate compounding businesses, shorter term – undervalued businesses, and special situations.

Why Ironwood?

Philosophy
Ironwood combines Charlie Munger’s emphasis on high-quality, long-term compounders with undervalued small/microcap companies and special situations. Ironwood focuses more on the downside risk than the upside opportunity. Excessive leverage is a particular downside risk to avoid.

Process
Disciplined investment process honed over five years that includes an extensive investment checklist.

Team and Organization

Nathan Reid, CPA, MBA began his career with Ernst & Young as an auditor. Mr. Reid left public accounting to be a successful principal financial and accounting officer for several private companies in a variety of industries. Mr. Reid founded and sold Southwest Realty and Property Management, LLC. Mr. Reid has also founded and managed three successful real estate investment partnerships utilizing value investing methodologies. Mr. Reid received his MBA from the W. P. Carey School of Business at ASU.

Investment Strategy

Margin of Safety
Utilizing a “margin of safety” investment principle over the long-term reliably yields higher net appreciation over full market cycles.

Circle of Competence
Focus on industries within that circle of competence, or companies and industries that are learnable and not subject to rapid change.  We avoid certain industries altogether, e.g. pharmaceuticals.

Asymmetric Risk/Reward
Focused on positive risk/reward situations, where potential rewards are bigger than potential losses. Balance sheet investing is an important example of asymmetric investing where asset strength limits downside, and income growth provides significant upside.

Long-term Compounders
Identify companies and management teams likely to compound at a high rate for an extended period of time. We seek businesses with long-term tailwinds, and avoid businesses with long-term headwinds.

Extraordinary Management
We look for management teams that are focussed on long-term capital allocation to maximize shareholder compounding. We avoid management focussed on empire building.

Under the Radar
Utilize various resources to identify small/micro cap opportunities not available to larger funds.

Investment Philosophy

Ironwood combines Charlie Munger’s emphasis on high-quality, long-term compounders with undervalued small/microcap companies and special situations. Ironwood focuses more on the downside risk than the upside opportunity. Excessive leverage is a particular downside risk to avoid.

Compounders are companies virtually certain to be worth far more in the future. They are often managed by extraordinary management, “Outsiders.” They are more likely to be found on 52-week high lists, than 52-week
low lists.

Small/micro cap companies are more frequently undervalued than larger companies because of sparse analyst coverage and an inability of larger, sophisticated investors to own them. Ironwood seeks such under the radar opportunities trading at a significant discount to our estimate of intrinsic value.

Special situations take many forms. Ironwood focuses on special situations that are under the radar or where we have an information or perspective advantage.

Investment Process

Risk Mitigation

Risk = Permanent Loss of Capital. We mitigate risk by ensuring the portfolio companies have these attributes…

Margin of SafetyMarket price significantly less than intrinsic value.

Avoid excessive leverageMost likely cause of permanent loss of capital.

Companies certain to be worth more in the futureCan erase a mistake in calculating intrinsic value.

Circle of CompetenceAvoid certain industries altogether, and do not rely on others circle of competence.

Strong Management—Partner with shareholder friendly management, especially Outsiders.

Asymmetric Risk/RewardLimited downside, uncertain upside.

Use of basketsUseful for out of favor sector investing.

SizingWhen odds heavily in your favor, size accordingly.

Concentrated DiversificationDiversify within a concentrated portfolio.

Disclaimer

This site does not contain all the information that is material to a prospective investor in Ironwood Capital Allocation Partners (the “Fund”).

Confidentiality; Not to be disseminated—The information set forth on this site is being furnished on a confidential basis to the recipient and does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services. Such an offer may only be made to accredited investors by means of delivery of a confidential private placement memorandum, or other similar materials that contain a description of material terms relating to such investment. The information published and the opinions expressed herein are provided for informational purposes only. This site is confidential and has been prepared solely for the information of the intended recipient and may not be reproduced, distributed or used for any other purpose. Reproduction and distribution of this site may constitute a violation of federal or state securities laws.

No advice—Nothing contained herein constitutes financial, legal, tax, or other advice. The Fund makes no representation that the information and opinions expressed herein are accurate, complete or current. The information contained herein is current as of the date hereof, but may become outdated or change.

RISKS—An investment in the Fund is speculative due to a variety of risks and considerations as detailed in the Confidential Private Placement Memorandum of the Fund, and this site is qualified in its entirety by the more complete information contained therein and in the related subscription materials.

Facts & opinions—Although the statements of facts on this site are based upon sources that Lizard Head, LLC (“LH”), the general partner of the Fund, believes to be reliable, LH does not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions and estimates included in this report constitute LH’s judgment as of the date of this site, and are subject to change without notice.

No Recommendation—The mention of or reference to specific companies, strategies or instruments in this site should not be interpreted as a recommendation or opinion that you should make any purchase or sale or participate in any transaction.

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