Inflation investing, 5 stocks to buy: Top-1% small-cap fund managers

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The father-son team behind a top-1% mutual fund explains how they pick small companies with high upside built to thrive amid inflation — and makes the case for 5 of their favorite stocks

in 2022, the father-son duo didn't take a victory lap because their fund still fell 1.6% — even though its index sank 19.3%. A historically tough year for stocks isn't an excuse for the Cooks.

SouthernSun's investing philosophy hasn't changed in the last 34 years. The firm still uses a simple, bottom-up stock-picking strategy to find companies with healthy balance sheets and the potential to generate substantial free cash flow and deliver strong absolute returns over time. However, Phillip explained that the way stocks are selected evolved to become more efficient, transparent, and data-reliant while empowering the firm's analysts to give input.

Once the Cooks and their colleagues find high-quality, cash-producing companies with capable management teams, they often hold them for several years. Phillip said that his private equity background makes him think more like a business owner than a short-term-focused trader.

 

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