FPA Queens Road Small Cap Value Fund on FTI Consulting, Inc.
Thesis
FTI Consulting generates much of its earnings from turnaround, restructuring, forensic and litigation advisory franchises. The fund views these businesses as countercyclical and relatively resistant to AI disruption. It favors management capital allocation and repurchases of stock depressed by volatile near-term earnings, establishing a starter position around 15 times current-year earnings.
“We were happy to buy a starting position at roughly 15x this year’s earnings.”
Key risks
- Short-term earnings volatility
- The restructuring and litigation franchises may prove less countercyclical than expected
- Share buybacks may not create value if operating performance weakens