Alpha Buying: What this Low-Profile Value Fund is Targeting

Author: Tim Melvin | November 20, 2025 09:38am

I have followed Aegis Financial for a long time, and they are exactly the sort of outfit I like to watch. This is a small, internally owned firm built around deep value in the parts of the market most investors avoid. They live in the land of small caps, cyclicals, commodity names, and assorted orphans of Wall Street. The firm dates back to the mid-1990s and has been managed for many years by Scott Barbee, who has spent decades doing one thing very well. He looks for companies that are trading at a fraction of what the underlying business and assets are worth, and he is patient enough to wait for the market to figure it out. The ownership structure is simple. The people making the decisions have their money alongside their clients and they care much more about long term results than gathering assets. That is exactly how I want a deep value shop to be set up.

When you read their material and then look at the 13F filings side by side, the story lines up. Aegis hunts where the big index funds and closet indexers do not. They want cheap assets, low expectations, and a solid margin of safety. That often leads them into energy, mining, and other capital intensive businesses where sentiment is usually awful at the point of maximum opportunity. The last two 13F filings show a very concentrated portfolio full of energy and resource names. They made a handful of meaningful changes in the third quarter. They opened a couple of new positions, added heavily to several existing names, trimmed a long standing winner, and completely exited one holding. Nothing about the activity looks like style drift. It looks like a disciplined value manager recycling capital from a maturing idea into opportunities where the discount to intrinsic value is still wide.

The heart of the third quarter activity is on the buy side, and it tells you a lot about how Aegis sees the world. They were buyers of Cenovus Energy (CVE), Precision Drilling (PDS), North American Construction Group (NOA), Vermilion Energy (VET), and Galiano Gold (GAU). In Cenovus and North American Construction Group they initiated fresh positions. In Precision Drilling, Vermilion, and Galiano they pressed their existing bets and took advantage of what they see as ongoing mispricing. On the sell side they trimmed Equinox Gold (EQX), which is still a very large core holding for the firm, and they sold out of Peabody Energy (BTU). To me that looks like classic deep value portfolio management. They are taking money off the table where the original thesis has largely played out and rotating it into situations where the upside to intrinsic value is still large.

Cenovus Energy (NYSE:CVE) is a new position and a great example of how Aegis likes to think about energy. Cenovus is a Canadian integrated oil company with a large oil sands footprint, conventional assets, and a material downstream refining and marketing arm. The oil sands business gives them very long duration reserves, while the downstream side can blunt some of the volatility in crude prices over time. Cenovus has been busy reshaping itself through acquisitions and asset sales, and it has been using strong cash flows to clean up the balance sheet and increase shareholder returns. At the right price, a company like this becomes a long life cash flow engine with real operating leverage to any sustained strength in oil prices. Aegis did not nibble around the edges here. They built a meaningful stake because they see a large gap between what the equity market is pricing in and the long term cash generation potential of the business.

Precision Drilling (NYSE:PDS) is not a new name for Aegis, but the buying in the third quarter was aggressive enough that it might as well be considered a fresh expression of conviction. Precision is the dominant land driller in Canada with a fleet of high quality rigs and a growing presence in key North American basins. This is a classic cyclical services business. When drilling activity is weak, the stocks get crushed and the market starts to assume that the pain is permanent. When activity picks up and rig markets tighten, day rates shift upward, margins expand, and free cash flow explodes higher. By adding heavily to Precision, Aegis is clearly betting that we are still in the early to middle innings of a healthier drilling cycle, not the late stages. They are willing to live with volatility in reported earnings in exchange for very high potential upside as utilization and pricing strengthen.

North American Construction Group (NYSE:NOA) is the other true new buy in the quarter and it fits Aegis like a tailored suit. NOA is a heavy construction and earthworks contractor that does a lot of work for the Canadian oil sands and other major mining operations. This is not a story stock. It is a fleet of big yellow iron, a roster of long term contracts with large resource companies, and a steady diet of recurring work maintaining and expanding pits, haul roads, and related infrastructure. The company has spent years building one of the largest independent equipment fleets in its niche and has locked in multi-year arrangements that give it strong revenue visibility. The market rarely awards a high multiple to a contractor like this, which is exactly what attracts a deep value manager. Aegis can buy a hard asset heavy business with contracted cash flows at a discount, then sit back and let time, contract execution, and occasional contract wins work in their favor.

Vermilion Energy (NYSE:VET) is another name where Aegis chose to increase its bet in the third quarter rather than start from scratch. Vermilion is a Canadian headquartered producer with diversified assets across Canada, Europe, and Australia, and it has leaned over time into liquids rich gas and conventional gas in markets where pricing can be structurally better. Recent years have been spent repairing the balance sheet, high grading the asset base, and selling non-core properties to improve returns. That process is never pretty and usually leaves the stock in the penalty box for longer than it deserves. Aegis appears to be taking the other side of that sentiment. By adding here, they are effectively saying that the heavy lifting is mostly done, the balance sheet is on firmer ground, and the remaining portfolio of assets has embedded value that is not fully reflected in the current share price, especially if gas markets tighten again.

Galiano Gold (NYSE:GAU) has been in the Aegis portfolio for some time and the third quarter buying looks like a high conviction manager taking advantage of volatility to add at attractive levels. Galiano's main asset is its interest in the Asanko Gold Mine in Ghana, a producing complex with room to grow through exploration and incremental project work. The company has used internal cash flow to build and expand the operation, which fits the Aegis preference for self-funding growth rather than serial equity issuance. Gold miners are often hated as a group and rarely get full credit for incremental progress at the asset level. That disconnect seems to be what Aegis is leaning into here. By owning a de risked producing asset in a mining friendly jurisdiction at a value price, they can get both operating leverage to the gold price and asset level value creation without paying a momentum multiple.

On the sale side, the moves are quieter but still instructive. Aegis trimmed Equinox Gold (EQX) but did not walk away from it. Equinox remains a very large position for the firm. Trimming a name like that is what disciplined managers do when a stock has worked well and the position size and risk exposure gets a little too large for comfort. They are not abandoning the thesis. They are managing risk and freeing up cash. The complete exit from Peabody Energy (BTU) is different. Coal has had a tremendous run as markets woke up to the reality that coal demand does not go to zero just because people wish it so. As the story matured and the easy money was made, Aegis chose to redeploy that capital into names with more remaining upside to intrinsic value. For a manager like this, there is always another mispriced asset to buy if you are willing to sell an old favorite when it has done its job.

Taken together, the firm and the recent portfolio moves are consistent. Aegis is not trying to guess the next hot theme or chase the latest AI story. They are doing the slow, sometimes lonely work of buying real businesses and hard assets at deep discounts, holding them through the inevitable volatility, and harvesting gains when the crowd finally shows up. The third quarter 13F shows them leaning further into long lived energy and resource assets with operating and cash flow leverage to any sustained strength in commodity markets. It shows them using trims and exits to manage risk and recycle gains rather than falling in love with any one stock. This is deep value the way it is supposed to be done and that is why I keep an eye on what Aegis is buying and selling every quarter.

Posted In: CVE GAU NOA PDS VET