Dear Fellow Shareholders,The FPA Queens Road Small Cap Value Fund (“Fund”) returned 0.70% in the first quarter of 2023. This compares to a -0.66% return for the Russell 2000 Value Index in the same period. As a reminder, we expect to outperform in down markets and trail somewhat in speculative markets as a result of our diligent, disciplined and patient process.Market CommentaryMarkets were choppy in the first quarter of 2023 with the Russell 2000 Index ending slightly up and the Russell 2000 Value Index ending slightly down. The big story was the collapse of Silicon Valley and Signature banks with worries that deposit runs would spread to other small banks. So far, most of the banks we speak to and read about seem to have sidestepped the mass withdrawal of deposits. But we expect there to be increased deposit shopping and regulatory scrutiny that may possibly lower returns for banks in the future. This has created a lot of uncertainty and we are watching the situation carefully.Queens Road owns two small banks – ServisFirst, which is a core position, and Axos, which is a smaller position. While both banks were down for the quarter, both ServisFirst and Axos outperformed the regional bank indices. Additionally, both ServisFirst and Axos significantly outperformed the regional bank indices during the two weeks when bank collapse worries were most acute.2Portfolio Bank Holdings versus Relevant ETFs2
This is typical for Queens Road. We believe a focus on quality up front has led to out-performance in down markets. Silicon Valley Bank failed because of too much deposit concentration on the liability side and too much duration risk on the asset side. But also because management was too focused on earnings and forgot banking principles.3 We believe both ServisFirst and Axos have broadly diversified deposit bases, appropriately matched assets and liabilities and reasonable liquidity and leverage. And most importantly, both are run by founder management teams with a demonstrated history of prudent growth and disciplined risk management (Tom Broughton at ServisFirst and Greg Garrabrants at Axos). Any bank will have trouble liquidating assets to meet large deposit redemption requests in a short period of time, even if the assets are sound. But we think we own two of the best properties in a currently troubled neighborhood.The recent regional bank crisis was typical for us in another way – we didn’t do very much. It seems to us that, even though the near-term crisis has abated, the range of medium term outcomes for small banks is unusually wide. Valuations are down, but life has gotten a lot harder for small banks – jittery depositors and regulators, rising funding rates and a rapid deceleration of credit growth. We dislike situations when there is a wide dispersion of potential outcomes. We have a strong preference for robustness and, in this type of scenario, we are skeptical of false precision - thinking we can get things exactly right. And so, we made small additions to our positions in ServisFirst and Axos as well as a handful of other companies in our portfolio that became available at what we believe are attractive valuations.In fact, the Fund’s cash position rose from 11.2% of AUM at the end of fourth quarter of 2022 to 12.6% of AUM at the end of first quarter of 2023. This was primarily the result of $21.9 million received from the Atlas Air and South Jersey Industries buyouts.4 As always, we are attempting to prudently put cash to work in high quality companies trading at reasonable valuations.Quality and the Four Pillar ProcessWe think of our investment process having four pillars:
We have a preference for long-term compounders – i.e., high-quality franchises with strong balance sheets, proven management teams and attractive industry dynamics that we hope to own forever. Compounders don’t usually come cheap, and while we are valuation conscious, we are generally willing to pay a little bit more for higher quality. While virtually all financial assets were down in 2022, quality compounders generally held up better.5So what do we mean by quality? At its most basic, we think quality means that we can have confidence that a company’s earnings and cash flows will be larger in three to five years than they are today. Different investors look at different metrics that describe quality. High returns on capital, high operating margins, organic growth, high cash conversion and low debt are all indicative of quality. But at the end of the day, we take a holistic look at our companies, look to identify the risks, try to remain conservative and judicious, and compare the current price to our confidence in the future. Our four pillars – balance sheet strength, valuation, management, and industry analysis – guide our assessment of quality.Historically, quality has been a large contributor to our outperformance during market downturns.6 Low leverage allows companies to survive and reinvest during recessions. Strong management teams can be trusted to shepherd the company through headwinds and find new opportunities. Entrenched competitive positions and industries with favorable economics and outlooks mean that the passage of time is our friend. In practice, it is never this easy. It is rare to find a company that sits cleanly atop each of the four pillars. And our view of the future is hazy at best. But when things get complicated and the future seems uncertain, the four pillars provide a framework for thinking through the next three to five years.Q1 2023 and Trailing Twelve Months (TTM) Contributors and Detractors7
Trailing Twelve Months (TTM) Contributors
Trailing Twelve Months (TTM) Detractors
Portfolio PositioningThe Fund holds cash as a residual of the investment process. When we cannot find companies that meet our stringent criteria, we will allow cash to build. Over a long time horizon, we would prefer to own a diversified collection of quality companies (acquired at reasonable prices) instead of cash. But we weigh this against our reluctance to sacrifice margin of safety and risk the permanent impairment of capital.During the quarter we added one new position, added to 10 current holdings, reduced three current holdings, and two of the Fund’s portfolio companies were bought out.21Despite the recent volatility and opaque macro environment, we feel better about the Fund’s long-term prospects than we have in quite some time. We do not make short term predictions on market direction. But the current valuations, competitive positions and track record of execution of the Fund’s holdings give us confidence that they will be worth more in three to five years than they are today.As always, and as significant co-investors in the Fund, we appreciate your trust in us to be good stewards of your capital. If you would like to discuss performance or the Fund’s portfolio holdings in greater detail, please let us know.Respectfully,Steve ScruggsPortfolio ManagerApril 14, 20231 As of March 31, 2023. Source: Morningstar Direct, FPA. Data shown for the FPA Queens Road Small Cap Value Fund – Investor Class (“Fund”). Inception of the Fund was June 13, 2002. The periods referenced above reflect Russell 2000 Value drawdowns 15% or greater and are calculated from that index’s peak and trough dates, (i.e., 6/14/2002-10/9/2002, 6/5/2007-3/9/2009, 5/10/2011-10/3/2011, 6/24/2015-2/11/2016, 9/20/2018-12/24/2018, 1/16/2020-3/23/2020, 11/8/2021-9/30/22). Please see page 1 for net performance of the Fund since inception. Please also see the end of this presentation for Important Disclosures and Definitions of key terms2 Source: Factset3 As succinctly articulated by Warren Buffett (Trades, Portfolio); https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-japan-trading-houses-inflation-recession-economy-2023-44 Source: PR Newswire: J.F. Lehman & Company Acquires Atlas Air Worldwide In Partnership With Apollo and Hill City Capital; March 17, 2023; https://www.prnewswire.com/news-releases/jf-lehman--company-acquires-atlas-air-worldwide-in-partnership-with-apollo-and-hill-city-capital-301775333.html5 Source: FTSE Russell: JP Morgan US Quality Factor Index; December 30, 2022; https://research.ftserussell.com/Analytics/Factsheets/Home/DownloadSingleIssue?issueName=JQUA&IsManual=false6 Please refer to the table on page 2 for performance of the Fund during 15% or greater downturns in the Russell 2000 Value Index.7 Reflects the top contributors and top detractors to the Fund’s performance based on contribution to return for the trailing twelve months (TTM). Contribution is presented gross of investment management fees, transactions costs, and Fund operating expenses, which if included, would reduce the returns presented. The information provided does not reflect all positions purchased, sold or recommended during the TTM. A copy of the methodology used and a list of every holding’s contribution to the overall Fund’s performance during the TTM is available by contacting [email protected]. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed. Totals may not sum due to rounding. ‘Percent of Portfolio’ reflects the average weight over the period8 Source: Deckers: Deckers Brands Reports First Quarter Fiscal 2023 Financial Results; July 28, 2022; https://ir.deckers.com/news-events/press-releases/press-release/2022/DECKERS-BRANDS-REPORTS-FIRST-QUARTER-FISCAL-2023-FINANCIAL-
RESULTS/9 Source: RLI Q3 earnings, October 19, 2022; https://investors.rlicorp.com/newsroom/news-details/2022/RLI-Reports-Third-Quarter-2022-Results/default.aspx10 Source: Fabrinet; https://investor.fabrinet.com/financial-information. Source: Lumentum press release, Apr 5 2023; https://investor.lumentum.com/financial-news-releases/news-details/2023/Lumentum-Announces-Preliminary-Financial-Results-and-Reporting-Date-for-Fiscal-Third-Quarter-2023-and-Increased-Share-Repurchase-Program/default.aspx
11 Source: Foss Patents, Jan 1 2023; http://www.fosspatents.com/2023/01/interdigital-announces-arbitration.html.Interdigital Press Release, Jan 19 2023; https://ir.interdigital.com/news-events/press-releases/news-details/2023/InterDigital-Issues-Preliminary-Financial-Results-for-Fourth-Quarter-2022/default.aspx12 Source: New Jersey Resources Fiscal 23Q1 Results; https://s26.q4cdn.com/222857764/files/doc_financials/2023/q1/NJR-1Q-2023-Financial-Results-Press-Release-vf.pdf
13 Source: Factset. Cumulative average growth rate is based on diluted earnings per share for year ends 2013-2022.14 Source: Factset: ServisFirst Bank (SFBS) returned -21.07% vs. the iShares U.S. Regional Banks ETF (IAT) which returned -32. 63% from 3/3/23 – 3/17/23. SFBS returned -20.32% vs. IAT which returned -24.46% from 12/31/22 – 3/31/23.15 For more information, see the Q4 2021 Commentary at www.fpa.com; https://fpa.com/docs/default-source/funds/fpa-queens-road-small-cap-value-fund/literature/fpa-queens-road-small-cap-value-fund-commentary-2021-q4.pdf?sfvrsn=601e909d_416 Source: MassDevice; Owens & Minor completes $1.6B acquisition of Apria; March 29, 2022 https://www.massdevice.com/owens-minor-completes-1-6b-acquisition-of-apria/
17 Source: Owens and Minor press releases; https://investors.owens-minor.com/press-releases/default.aspx18 Source: UNFI Annual Report; July 30, 2022; page 12, https://s22.q4cdn.com/589001886/files/doc_financials/2022/annual/UNFI-2022-10-K-as-filed.pdf19 Source: UNFI fiscal 22Q2 earnings; https://ir.unfi.com/news/press-release-details/2023/United-Natural-Foods-Inc.-Reports-Second-Quarter-Fiscal-2023-Results/default.aspx20 Source: PVH Corp, Nov 30, 2022; https://www.pvh.com/news/press-releases/PVH-Corp-Extends-Licenses-With-GIII-Apparel-Group-Ltd-as-Part-of-a-MultiYear-Transition-to-Bring-Cor
21 Portfolio composition will change due to ongoing management of the Fund.This Commentary is for informational and discussion purposes only and does not constitute, and should not be construed as, an offer or solicitation for the purchase or sale of any securities, products or services discussed, and neither does it provide investment advice. Any such offer or solicitation shall only be made pursuant to the Fund’s Prospectus, which supersedes the information contained herein in its entirety. This Commentary does not constitute an investment management agreement or offering circular.The statements contained herein reflect the opinions and views of the portfolio managers as of the date written, is subject to change without notice, and may be forward-looking and/or based on current expectations, projections, and/or information currently available. Such information may not be accurate over the long-term. These views may differ from other portfolio managers and analysts of the firm as a whole and are not intended to be a forecast of future events, a guarantee of future results or investment advice.Portfolio composition will change due to ongoing management of the Fund. References to individual securities or sectors are for informational purposes only and should not be construed as recommendations by the Fund, the portfolio manager, the Adviser, the Sub-Adviser or the distributor. It should not be assumed that future investments will be profitable or will equal the performance of the security or sector examples discussed. The portfolio holdings as of the most recent quarter-end may be obtained at www.fpa.com.
Total Return | |||||
SVB Turmoil | 23Q1 | ||||
Ticker | Name | Market Cap | 3/3/23 – 3/17/23 | 12/31/22 – 3/31/23 | |
SFBS | ServisFirst Bancshares Inc. | 2,861 | -21% | -20% | |
AX | Axos Financial, Inc. | 2,248 | -21% | -3% | |
IAT | iShares U.S. Regional Banks ETF | -33% | -24% | ||
KRE | SP DR S&P Regional Banking ETF | -28% | -25% | ||
This is typical for Queens Road. We believe a focus on quality up front has led to out-performance in down markets. Silicon Valley Bank failed because of too much deposit concentration on the liability side and too much duration risk on the asset side. But also because management was too focused on earnings and forgot banking principles.3 We believe both ServisFirst and Axos have broadly diversified deposit bases, appropriately matched assets and liabilities and reasonable liquidity and leverage. And most importantly, both are run by founder management teams with a demonstrated history of prudent growth and disciplined risk management (Tom Broughton at ServisFirst and Greg Garrabrants at Axos). Any bank will have trouble liquidating assets to meet large deposit redemption requests in a short period of time, even if the assets are sound. But we think we own two of the best properties in a currently troubled neighborhood.The recent regional bank crisis was typical for us in another way – we didn’t do very much. It seems to us that, even though the near-term crisis has abated, the range of medium term outcomes for small banks is unusually wide. Valuations are down, but life has gotten a lot harder for small banks – jittery depositors and regulators, rising funding rates and a rapid deceleration of credit growth. We dislike situations when there is a wide dispersion of potential outcomes. We have a strong preference for robustness and, in this type of scenario, we are skeptical of false precision - thinking we can get things exactly right. And so, we made small additions to our positions in ServisFirst and Axos as well as a handful of other companies in our portfolio that became available at what we believe are attractive valuations.In fact, the Fund’s cash position rose from 11.2% of AUM at the end of fourth quarter of 2022 to 12.6% of AUM at the end of first quarter of 2023. This was primarily the result of $21.9 million received from the Atlas Air and South Jersey Industries buyouts.4 As always, we are attempting to prudently put cash to work in high quality companies trading at reasonable valuations.Quality and the Four Pillar ProcessWe think of our investment process having four pillars:
- Balance Sheet Strength –Seek companies with strong balance sheets. We are not comfortableowning companies that have significant liabilities (e.g., debt, legal, regulatory, pension or something inherent in the business model) that could cause insolvency concerns when there’s an economic, financial, or other type of crisis. We want to make sure we are invested in companies that have staying power.
- Valuation –Normalize economic earnings over full market cycles. Primarily using free cash flowdiscount valuation models. Demand a margin of safety.
- Management – Evaluate management’s track record of laying out a long-term strategy andexecuting to achieve their stated objectives.
- Sector and Industry Analysis –We want to own companies in growing industries with stablecompetitive dynamics and favorable economics. We avoid commoditized or overly competitive industries.
We have a preference for long-term compounders – i.e., high-quality franchises with strong balance sheets, proven management teams and attractive industry dynamics that we hope to own forever. Compounders don’t usually come cheap, and while we are valuation conscious, we are generally willing to pay a little bit more for higher quality. While virtually all financial assets were down in 2022, quality compounders generally held up better.5So what do we mean by quality? At its most basic, we think quality means that we can have confidence that a company’s earnings and cash flows will be larger in three to five years than they are today. Different investors look at different metrics that describe quality. High returns on capital, high operating margins, organic growth, high cash conversion and low debt are all indicative of quality. But at the end of the day, we take a holistic look at our companies, look to identify the risks, try to remain conservative and judicious, and compare the current price to our confidence in the future. Our four pillars – balance sheet strength, valuation, management, and industry analysis – guide our assessment of quality.Historically, quality has been a large contributor to our outperformance during market downturns.6 Low leverage allows companies to survive and reinvest during recessions. Strong management teams can be trusted to shepherd the company through headwinds and find new opportunities. Entrenched competitive positions and industries with favorable economics and outlooks mean that the passage of time is our friend. In practice, it is never this easy. It is rare to find a company that sits cleanly atop each of the four pillars. And our view of the future is hazy at best. But when things get complicated and the future seems uncertain, the four pillars provide a framework for thinking through the next three to five years.Q1 2023 and Trailing Twelve Months (TTM) Contributors and Detractors7
Contributors | Performance | Percent of | Detractors | Performance | Percent of |
Contribution | Portfolio | Contribution | Portfolio | ||
TTM | |||||
Deckers Outdoor | 0.93% | 1.9% | ServisFirst Bancshares | -2.25% | 4.7% |
RLI | 0.75% | 3.2% | Synaptics | -1.72% | 2.5% |
Fabrinet | 0.67% | 4.1% | Owens & Minor | -1.26% | 1.1% |
InterDigital | 0.46% | 2.8% | United Natural Foods | -0.93% | 2.1% |
New Jersey Resources | 0.46% | 2.6% | G-III Apparel Group, Ltd. | -0.71% | 1.3% |
3.27% | 14.6% | -6.88% | 11.6% | ||
QTD | |||||
InterDigital | 1.14% | 3.2% | United Natural Foods | -0.89% | 2.3% |
PVH | 0.51% | 2.1% | American Equity Invt Life | -0.86% | 3.7% |
MasTec | 0.39% | 3.5% | ServisFirst Bancshares | -0.85% | 3.9% |
CSW Industrials | 0.32% | 1.8% | Fabrinet | -0.38% | 4.9% |
Arrow Electronics | 0.31% | 1.7% | Scholastic | -0.27% | 1.9% |
2.67% | 12.3% | -3.24% | 16.8% |
Trailing Twelve Months (TTM) Contributors
- Deckers (DECK, Financial) is a footwear and apparel company that owns the UGG, Hoka, Teva, Sanuk and Koolaburra Management has done a masterful job growing and extending the UGG franchise. And now they are repeating their success with Hoka running shoes which surpassed $1 billion in sales last year.8 At over 20 times earnings, we weigh Deckers’ full valuation against the quality of the management team, strong brands and net cash balance sheet and are comfortable with our current position.
- RLI (RLI, Financial) is a high-quality specialty insurer with a collection of niche and arcane lines across property &casualty (P&C). We believe RLI has an attractive combined ratio and return on equity, a conservative underwriting culture and growth opportunities. Despite its full price, we continue to hold RLI because of its high quality and our reluctance to trade in and out. The insurance sector as a whole performed well last year, but RLI got a boost from strong third quarter 2022 earnings and the sale of its equity stake in sunglass manufacturer Maui Jim.9
- Fabrinet (FN, Financial) is a contract manufacturer of optical communications sensors and equipment. The companyhas a niche in hard to replicate precision manufacturing technologies and an enviable track record of execution. The majority of sales go into the optical communications OEMs (original equipment manufacturing), but Fabrinet has been successfully diversifying into the industrial, auto and medical endmarkets. The stock performed well last year due to strong results but has been weaker this year as guidance has moderated and competitor Lumentum reported disappointing preliminary results.10
- InterDigital (IDCC, Financial) is a research and development organization that develops and acquires wireless and videopatents across key technologies. The company has a history of strong financial performance, opportunistically buys back shares and pays a modest dividend. Shares jumped earlier this year when InterDigital announced licensing renewals with Samsung, LG and Panasonic and then reported strong fourth quarter 2022 results.11
- New Jersey Resources (NJR, Financial) is a regulated gas utility for Southern New Jersey. The company has slowlyand prudently diversified into midstream, solar, marketing and services while continuing to grow the core utility. Shares performed well on the back of successive strong earnings reports and improved guidance.12
Trailing Twelve Months (TTM) Detractors
- ServisFirst Bank (SFBS, Financial) is a conservatively run lending franchise helmed by Tom Broughton. Tom hires localbankers but doesn’t build branches – this allows for best-in-class efficiency metrics while maintaining a strong and conservative lending culture. Return on equity (ROE) and average earnings per share growth have been near 20% for the last 10 years through year-end 202213 – very attractive for a conservative, vanilla commercial lender. ServisFirst was down significantly following the failure of Silicon Valley Bank but outperformed the iShares Regional Bank ETF over both the quarter and the two week period when deposit run fears were most acute.14
- Synaptics (SYNA, Financial) is a developer of human interface (HMI) hardware and software that has diversified intohigher margin internet of things (IoT) products. Synaptics was a top five contributor for the Fund in 2021 and we significantly trimmed the position due to valuation.15 The shares were back down in 2022 with concerns about consumer technology volumes. We have been incrementally buying back shares at lower prices.
- Owens and Minor (OMI, Financial) makes and distributes medical and surgical supplies including masks, gowns andgloves (the Halyard Health S&IP business acquired in 2018). They over earned and paid down debt during COVID but re-levered up to acquire Apria, a manufacturer of home health equipment at the beginning of 2022.16 Results have been coming in weaker and third and fourth quarter 2022 were misses.17 The market is currently penalizing companies with deteriorating fundamentals and higher loads.
- United Natural Foods (UNFI, Financial) distributes natural and organic food. Whole Foods is a 20% customer but UNFIhas done a reasonable job diversifying its product set and customer base, with a big boost from the acquisition of SuperValu in 2018.18 The share price suffered when the January 2023 earnings report revealed a sudden margin deterioration and the company took down guidance.19 The margin miss was partially due to extremely volatile food prices, partially due to high priced organic food items losing share and partially due execution mistakes at the company. The company is cheap on reduced earnings estimates and we are comfortable with our current position.
- G-III (GIII, Financial) is an apparel manufacturer that licenses the Tommy Hilfiger and Calvin Klein women’s and othercategories in the U.S. and owns the Donna Karan, Karl Lagerfeld and a stable of smaller brands globally. Shares collapsed after a third quarter 2022 earnings report when the company announced that Tommy and Calvin’s owner, PVH (which the Fund also owns), was in-sourcing the licensing arrangement.20 We had considered this possibility and owned G-III in smaller size. G-III remains cheap relative to its peers but with lingering questions about the license transition, bloated inventory and the quality of the fully owned brands.
Portfolio PositioningThe Fund holds cash as a residual of the investment process. When we cannot find companies that meet our stringent criteria, we will allow cash to build. Over a long time horizon, we would prefer to own a diversified collection of quality companies (acquired at reasonable prices) instead of cash. But we weigh this against our reluctance to sacrifice margin of safety and risk the permanent impairment of capital.During the quarter we added one new position, added to 10 current holdings, reduced three current holdings, and two of the Fund’s portfolio companies were bought out.21Despite the recent volatility and opaque macro environment, we feel better about the Fund’s long-term prospects than we have in quite some time. We do not make short term predictions on market direction. But the current valuations, competitive positions and track record of execution of the Fund’s holdings give us confidence that they will be worth more in three to five years than they are today.As always, and as significant co-investors in the Fund, we appreciate your trust in us to be good stewards of your capital. If you would like to discuss performance or the Fund’s portfolio holdings in greater detail, please let us know.Respectfully,Steve ScruggsPortfolio ManagerApril 14, 20231 As of March 31, 2023. Source: Morningstar Direct, FPA. Data shown for the FPA Queens Road Small Cap Value Fund – Investor Class (“Fund”). Inception of the Fund was June 13, 2002. The periods referenced above reflect Russell 2000 Value drawdowns 15% or greater and are calculated from that index’s peak and trough dates, (i.e., 6/14/2002-10/9/2002, 6/5/2007-3/9/2009, 5/10/2011-10/3/2011, 6/24/2015-2/11/2016, 9/20/2018-12/24/2018, 1/16/2020-3/23/2020, 11/8/2021-9/30/22). Please see page 1 for net performance of the Fund since inception. Please also see the end of this presentation for Important Disclosures and Definitions of key terms2 Source: Factset3 As succinctly articulated by Warren Buffett (Trades, Portfolio); https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-japan-trading-houses-inflation-recession-economy-2023-44 Source: PR Newswire: J.F. Lehman & Company Acquires Atlas Air Worldwide In Partnership With Apollo and Hill City Capital; March 17, 2023; https://www.prnewswire.com/news-releases/jf-lehman--company-acquires-atlas-air-worldwide-in-partnership-with-apollo-and-hill-city-capital-301775333.html5 Source: FTSE Russell: JP Morgan US Quality Factor Index; December 30, 2022; https://research.ftserussell.com/Analytics/Factsheets/Home/DownloadSingleIssue?issueName=JQUA&IsManual=false6 Please refer to the table on page 2 for performance of the Fund during 15% or greater downturns in the Russell 2000 Value Index.7 Reflects the top contributors and top detractors to the Fund’s performance based on contribution to return for the trailing twelve months (TTM). Contribution is presented gross of investment management fees, transactions costs, and Fund operating expenses, which if included, would reduce the returns presented. The information provided does not reflect all positions purchased, sold or recommended during the TTM. A copy of the methodology used and a list of every holding’s contribution to the overall Fund’s performance during the TTM is available by contacting [email protected]. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed. Totals may not sum due to rounding. ‘Percent of Portfolio’ reflects the average weight over the period8 Source: Deckers: Deckers Brands Reports First Quarter Fiscal 2023 Financial Results; July 28, 2022; https://ir.deckers.com/news-events/press-releases/press-release/2022/DECKERS-BRANDS-REPORTS-FIRST-QUARTER-FISCAL-2023-FINANCIAL-
RESULTS/9 Source: RLI Q3 earnings, October 19, 2022; https://investors.rlicorp.com/newsroom/news-details/2022/RLI-Reports-Third-Quarter-2022-Results/default.aspx10 Source: Fabrinet; https://investor.fabrinet.com/financial-information. Source: Lumentum press release, Apr 5 2023; https://investor.lumentum.com/financial-news-releases/news-details/2023/Lumentum-Announces-Preliminary-Financial-Results-and-Reporting-Date-for-Fiscal-Third-Quarter-2023-and-Increased-Share-Repurchase-Program/default.aspx
11 Source: Foss Patents, Jan 1 2023; http://www.fosspatents.com/2023/01/interdigital-announces-arbitration.html.Interdigital Press Release, Jan 19 2023; https://ir.interdigital.com/news-events/press-releases/news-details/2023/InterDigital-Issues-Preliminary-Financial-Results-for-Fourth-Quarter-2022/default.aspx12 Source: New Jersey Resources Fiscal 23Q1 Results; https://s26.q4cdn.com/222857764/files/doc_financials/2023/q1/NJR-1Q-2023-Financial-Results-Press-Release-vf.pdf
13 Source: Factset. Cumulative average growth rate is based on diluted earnings per share for year ends 2013-2022.14 Source: Factset: ServisFirst Bank (SFBS) returned -21.07% vs. the iShares U.S. Regional Banks ETF (IAT) which returned -32. 63% from 3/3/23 – 3/17/23. SFBS returned -20.32% vs. IAT which returned -24.46% from 12/31/22 – 3/31/23.15 For more information, see the Q4 2021 Commentary at www.fpa.com; https://fpa.com/docs/default-source/funds/fpa-queens-road-small-cap-value-fund/literature/fpa-queens-road-small-cap-value-fund-commentary-2021-q4.pdf?sfvrsn=601e909d_416 Source: MassDevice; Owens & Minor completes $1.6B acquisition of Apria; March 29, 2022 https://www.massdevice.com/owens-minor-completes-1-6b-acquisition-of-apria/
17 Source: Owens and Minor press releases; https://investors.owens-minor.com/press-releases/default.aspx18 Source: UNFI Annual Report; July 30, 2022; page 12, https://s22.q4cdn.com/589001886/files/doc_financials/2022/annual/UNFI-2022-10-K-as-filed.pdf19 Source: UNFI fiscal 22Q2 earnings; https://ir.unfi.com/news/press-release-details/2023/United-Natural-Foods-Inc.-Reports-Second-Quarter-Fiscal-2023-Results/default.aspx20 Source: PVH Corp, Nov 30, 2022; https://www.pvh.com/news/press-releases/PVH-Corp-Extends-Licenses-With-GIII-Apparel-Group-Ltd-as-Part-of-a-MultiYear-Transition-to-Bring-Cor
21 Portfolio composition will change due to ongoing management of the Fund.This Commentary is for informational and discussion purposes only and does not constitute, and should not be construed as, an offer or solicitation for the purchase or sale of any securities, products or services discussed, and neither does it provide investment advice. Any such offer or solicitation shall only be made pursuant to the Fund’s Prospectus, which supersedes the information contained herein in its entirety. This Commentary does not constitute an investment management agreement or offering circular.The statements contained herein reflect the opinions and views of the portfolio managers as of the date written, is subject to change without notice, and may be forward-looking and/or based on current expectations, projections, and/or information currently available. Such information may not be accurate over the long-term. These views may differ from other portfolio managers and analysts of the firm as a whole and are not intended to be a forecast of future events, a guarantee of future results or investment advice.Portfolio composition will change due to ongoing management of the Fund. References to individual securities or sectors are for informational purposes only and should not be construed as recommendations by the Fund, the portfolio manager, the Adviser, the Sub-Adviser or the distributor. It should not be assumed that future investments will be profitable or will equal the performance of the security or sector examples discussed. The portfolio holdings as of the most recent quarter-end may be obtained at www.fpa.com.
