Small-Cap in Name Only: Fund Defies Its Way to Recent Success

What's in a name? Not much, apparently, when it comes to Intrepid Small Cap (symbol ICMAX). The $88 million fund holds some decidedly big companies, such as Newmont Mining (market capitalization: $20 billion) and the Dutch brewer Heineken ($16 billion). Unable to find stocks that met his criteria, manager Eric Cinnamond also kept as much as 40 percent of the fund's assets in cash last year.

Thanks to that decision in particular, Intrepid was one of only six diversified U.S. stock funds to make money over the past year. "Maybe that proves that the right way to manage assets is not to sit in a style box that a consultant told us we need to be in," Cinnamond said.

To be fair, Intrepid in its current incarnation isn't entirely devoid of small companies. At last report, it had 42 percent of its assets in small companies and 28 percent in micro-caps (as well as 15 percent still in cash). Cinnamond, who launched the fund in 2005, looks for stocks that sell for at least 20 percent below his assessment of the underlying company's value. He prefers high-quality concerns with little to no debt and strong free cash flow (the money left over each year after capital outlays).

Cinnamond is especially drawn to energy stocks (21 percent of assets). Unit Corp. (UNT), a natural gas producer, is his biggest holding. Unit is worth about $2 billion, or $42 a share, Cinnamond said. The shares, which he first bought last October at less than $30, closed at $33 on June 15.