For this edition of Under the Radar, I want to take a look at a small-cap value fund that embodies many of the principles we discuss regularly in these pages. It is a fund built on patience, discipline, balance sheet analysis, and the willingness to look wrong for stretches of time while waiting for value to be recognized.

In a market increasingly dominated by passive flows, momentum chasing, and benchmark hugging, that alone makes it interesting.

I am talking about FPA Investments and the FPA Queens Road Small Cap Value Fund.

This is not a flashy product. Nobody is showing up on financial television screaming about it. There are no celebrity portfolio managers making grand macro pronouncements every afternoon. That is part of what makes the story compelling.

The fund represents an older style of investing where the emphasis is on buying understandable businesses at sensible prices and allowing time and compounding to do the heavy lifting.

The origins of the strategy go back more than two decades. The original Queens Road Small Cap Value strategy was launched in 2002 by Bragg Financial Advisors in Charlotte, North Carolina. The Queens Road name itself comes from one of Charlotte's historic and affluent boulevards, which feels appropriate because the strategy has always reflected a very old-school approach to preserving and compounding wealth.

At the center of the effort has long been portfolio manager Steven Scruggs, who helped shape the strategy into one of the more respected small-cap value approaches among sophisticated allocators and long-term investors.

The investment process was never complicated. In fact, its simplicity is part of the appeal.

The managers look for small-capitalization companies trading below their estimate of intrinsic value. They favor firms with strong balance sheets, capable management teams, understandable business models, and reasonable valuations based on earnings, cash flow, and assets. They avoid excessive leverage and tend to be skeptical of fashionable stories that rely more on narrative than economics.

That sounds almost quaint in modern markets.

Over the past fifteen years, investors have been conditioned to believe that valuation no longer matters. Entire generations of traders have been taught that momentum, passive flows, and thematic excitement are the only forces that count. During speculative periods, disciplined value investing can feel like standing outside a casino explaining actuarial science to people hitting jackpots at the roulette wheel.

Yet history has a habit of humbling investors who decide price no longer matters.

The Queens Road team stayed remarkably consistent through multiple market cycles. They survived the aftermath of the technology bubble, the financial crisis, the post-2009 liquidity-driven bull market, the meme stock era, and the concentration mania surrounding mega-cap technology companies.

Through all of it, they kept practicing essentially the same discipline:

  • Buy understandable businesses
  • Demand a margin of safety
  • Avoid excessive leverage
  • Be patient

That patience eventually attracted the attention of one of the most respected names in value investing.

The strategy ultimately became part of FPA Investments, creating what is today known as the FPA Queens Road Small Cap Value Fund. For longtime value investors, that combination made perfect sense.

FPA has long occupied a unique corner of the mutual fund world. The firm built its reputation through legendary managers like Bob Rodriguez and funds such as FPA Crescent and FPA Capital. Unlike much of the asset management industry, FPA developed a culture centered around absolute returns, downside protection, skepticism toward market euphoria, and the willingness to hold cash when bargains were scarce.

In many ways, FPA became one of the last remaining mutual fund organizations where independent thinking still mattered more than asset gathering.

That philosophical overlap made the partnership with Queens Road a natural fit.

Importantly, the move to FPA did not fundamentally alter the investment process. Bragg Financial Advisors remained involved in the management of the strategy, and the underlying discipline stayed intact.

That matters because too often acquisitions in asset management destroy what made a boutique successful in the first place. The marketing department takes over. Risk tolerance changes. The fund becomes benchmark aware. Portfolio turnover rises. Before long, the strategy becomes indistinguishable from hundreds of other products competing for flows.

That does not appear to have happened here.

The portfolio still reflects genuine active management. Holdings are selected one company at a time through bottom-up analysis. The managers are willing to own unpopular sectors when valuations justify it and avoid crowded areas when prices become detached from reality.

In other words, they still invest like owners instead of product manufacturers.

For Under the Radar readers, the fund is interesting for another reason. Small-cap value remains one of the few genuinely inefficient areas left in public markets. Large-cap stocks are now picked apart by armies of analysts, algorithms, hedge funds, and quant systems. Small companies with limited coverage can still become materially mispriced, especially during periods of volatility or economic uncertainty.

That creates opportunity for disciplined managers willing to do the work.

The fund also represents something increasingly rare in modern finance: intellectual consistency. The managers are not reinventing themselves every twelve months to fit whatever factor or narrative is currently attracting inflows. They are practicing a traditional value discipline that would have been recognizable to Graham and Dodd decades ago.

That does not guarantee outperformance every year. In fact, it almost guarantees stretches of frustration during speculative environments.

Real value investing often looks foolish right before it works.

That is the price of admission.

One of the more useful exercises when studying a disciplined value manager is looking at where they are putting fresh capital to work. New purchases often tell you far more about a manager's worldview than market commentary or shareholder letters.

During the first quarter, the FPA Queens Road Small Cap Value Fund added to or established positions in several companies that fit squarely within its long-standing emphasis on financially sound businesses trading at sensible valuations.

First American Financial (NYSE:FAF)

First American Financial is one of the largest title insurance and settlement services companies in the United States. This is exactly the sort of boring but economically important business value managers tend to love.

Title insurance is deeply tied to real estate transaction volumes, which means the business can suffer during housing slowdowns and periods of elevated interest rates. That cyclical pressure can create opportunities when investors become overly pessimistic about near-term housing activity.

Despite softer transaction volumes in recent years, First American maintains a strong competitive position, generates substantial cash flow over full cycles, and possesses valuable data and information assets tied to real estate transactions.

For patient investors who believe housing activity eventually normalizes, the stock offers exposure to a high-quality franchise trading at far more reasonable valuations than the broader market.

Dorman Products (NASDAQ:DORM)

Dorman Products fits another classic value framework. The company manufactures replacement automotive parts, specializing in aftermarket components that are often difficult to source through traditional channels.

It is not a glamorous business, but it benefits from several durable tailwinds. The average age of vehicles on American roads continues to rise, increasing demand for replacement parts and repairs. Dorman has built a strong distribution network and a reputation for solving niche supply problems for mechanics and repair shops.

The business also tends to be relatively resilient during economic slowdowns because consumers frequently choose repairs over purchasing expensive new vehicles.

That combination of steady cash generation, defensible market position, and exposure to the aging vehicle fleet likely made the company attractive to a disciplined small-cap value manager.

ePlus (NASDAQ:PLUS)

ePlus is perhaps less familiar to many investors but represents another example of the sort of overlooked business that often appears in deep value portfolios.

The company provides IT solutions, cloud services, cybersecurity offerings, and technology financing to businesses and government entities.

Technology services firms often get ignored because investors focus almost exclusively on the large software and semiconductor names dominating headlines. Yet companies like ePlus occupy an important middle layer of enterprise technology infrastructure.

The business has developed recurring customer relationships, generates healthy cash flow, and benefits from ongoing demand for cybersecurity, networking, and cloud migration services.

Unlike many speculative technology companies, ePlus has historically combined profitability with disciplined capital allocation, traits that tend to appeal strongly to traditional value investors.

RLI Corp. (NYSE:RLI)

RLI Corp. rounds out the list with another financially conservative business model.

The specialty insurer has long been respected for disciplined underwriting and a focus on niche insurance markets where pricing and risk selection matter more than scale alone. In an industry where many competitors periodically destroy capital chasing premium growth, RLI has built a reputation for maintaining underwriting discipline even when it means sacrificing short-term expansion.

The company has historically generated strong returns on equity and substantial book value growth over time. Insurance businesses run by rational underwriters have always attracted value investors because they combine investment income, underwriting profits, and compounding book value.

In a world where many financial companies remain heavily leveraged or exposed to aggressive lending risks, RLI represents a cleaner and more conservatively managed franchise.

Taken together, these purchases say a great deal about how the FPA Queens Road team views the current market environment. None of these companies are speculative concept stocks dependent on aggressive multiple expansion. They are established businesses with understandable economics, durable market positions, and management teams operating in industries where disciplined execution still matters.

That remains the hallmark of genuine value investing, even if the market occasionally forgets it.

For patient investors willing to endure periods of relative underperformance, strategies like the FPA Queens Road Small Cap Value Fund still offer something increasingly difficult to find in markets dominated by indexing and momentum speculation: a disciplined attempt to buy dollar bills for fifty cents.

That idea may never become fashionable again.

It does not need to.