Scott Barbee, manager of the Aegis Value Fund (AVALX), is Business Insider’s Investor of the Month for March.
Even as major stock-market indexes have plunged, his small-cap fund is up nearly 10% in March alone and 14% year-to-date. But Barbee, who has managed the fund since 1998, has also outperformed over the long run. Since March 2020, AVALX has returned 257% compared to the S&P 500’s 125%. And it’s beaten 99% of similar funds over the last 15 years, Morningstar data shows.
The fund has gotten a major boost in recent months thanks to its high concentrations in energy and materials stocks, as the market begins to rotate away from heavy concentrations in Big Tech names.
While the market was preoccupied with the AI hype last year, Barbee looked elsewhere for investment opportunities instead of buying into the bullish sentiment.
“These big cap growth stocks have just sucked a lot of the capital out of the rest of the market, and it’s led to, in my view, a misallocation of capital,” Barbee told Business Insider.
“It’s left a lot of sectors in the market starved for capital. I think energy and materials have been one of those areas of the last several years, and so, after having many, many years of a fairly distributed portfolio, we’ve become much, much more angular in our approach and have held a lot more of the materials and energy stocks,” he added.
Below are the fund’s top five holdings as of December 31, 2024, and their performance over the last 12 months as of March 26.
- Hallador Energy (HNRG); 151% returns LTM; 6.61% weighting
- International Petroleum (IPCFF); 29.1% returns LTM; 6.48% weighting
- Amerigo Resources (ARREF); 24% returns LTM; 5.94% weighting
- Natural Gas Services Group (NGS); 12.7% returns LTM; 5.33% weighting
- Kenmare Resources (KMRPF); 48.4% returns LTM; 4.72% weighting
Barbee uses a meticulous bottom-up strategy to search for deeply discounted stocks in the market, screening for companies with low price-to-book and cash flow multiples, as well as low amounts of leverage.
Having conviction in the fund’s deep value principles — even as value stocks lagged growth tech stocks in recent years — has also helped Barbee outperform.
“Not derisking at the bottom or switching into something that appears more attractive at times when the space was at its lows and very cheap,” was Barbee’s answer when asked about the key to his long-term success.
Going forward, Barbee sees continued potential in the energy sector, especially Canadian energy companies such as MEG Energy (MEGEF), Athabasca Oil (ATHOF), and International Petroleum (IPCFF).
Barbee is also bullish on precious metals and mining stocks, with a 25% allocation to the sector. Mining stocks were crushed in 2015 as commodity prices plunged, and the VanEck Junior Gold Miners ETF (GDJX), which tracks the performance of precious metals mining, dropped over 80% between 2011 and 2015.
“It’s just an unbelievable amount of underperformance. That big decline sets the stage to have very, very cheap stocks in that in that sector,” Barbee said.
He believes the industry is still recovering — and it doesn’t hurt that investors are turning to materials for a safe haven as tariff volatility and inflation rock markets.
Those considered for BI’s Investor of the Month include managers of US-listed mutual funds or ETFs, those whose funds have outperformed peers in a given month, and those whose funds are outperforming a benchmark index (in most cases this will be the S&P 500) on a trailing 12-month basis. Leveraged funds are not considered.