Stephen Bauer of Truffle Hound Capital

Truffle Hound Capital, LLC manages a global long-biased hedge fund that has returned 17.1 percent net annualized to investors since its January 1, 1999 inception. Led by its 40-year-old founder, Stephen Bauer, Truffle Hound has had only one down year while outperforming the S&P 500 in each of the past 11. The fund has achieved its impressive record using almost no leverage and maintaining a broadly diversified portfolio of 50 to 120 stocks. With only minimal marketing, Truffle Hound has grown from $1.5 million in assets under management to its present size of close to $200 million, more than half of which belongs to Steve and members of his family. Eighty percent of Steve’s own liquid net worth is invested in the fund.

Truffle Hound’s investable universe is 20,000 global stocks, most with market caps below $500 million. It finds stocks from within this universe through a systematic idea generation process based on factors strongly associated with outperformance, such as insider buying and price declines caused by forced selling. In addition, the fund uses a top-down approach to portfolio construction that allows it to mitigate the costs of diversification, create naturally hedged portfolios, and avoid macroeconomic headwinds. Truffle Hound’s unique methods, and the record they have produced, have attracted an unusually loyal investor base, which, with only one exception has never made a Stephen Bauer of Truffle Hound Capital, LLC full redemption, and which even increased its aggregate investment during the financial crisis of 2008.

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