Who I am, and what I seek to accomplish @ Sophon

A brief introduction on myself and what I seek to build

Hello, readers!

It’s a pleasure to work with such a skilled team at Sophon and produce investment research for all of you. The feedback we’ve gotten so far (in our brief existence) has been humbling, and our goal is to only make it better and more institutional over time. Some of you are wondering about my goals and intentions behind Sophon, and I thought it worthwhile to give a brief introduction.

My name is Franco Chomnalez. I am based in Los Angeles and previously worked at ARS Capital Partners ($1.6B AUM) - where I divided my time between a long-only, thematic fund as well as the platform’s affiliate long/short hedge fund, Papyrus Capital. I worked under two phenomenal mentors/portfolio managers - Ross Taylor III (ex-Caxton Associates) and Nitin Sacheti (ex-Cobalt Capital, Tiger Europe Management).

Prior to ARS, I researched public equities at CH Global Capital, an asset manager based in New York. I began my career at Bain & Company, as a strategy consultant. At Bain, I spent most of my time working on the retainer team for one of the largest activist hedge funds in the United States.

Growing up, I traded stocks on my spare time and talked about business with my parents, who were both investment bankers. My real dream though was to be an investigative journalist - I love writing and doing deep research. After college, I didn’t give up on my dream of being a writer, but I took the job at Bain since I figured it would provide career security and give me skills transferable to whatever I sought out to do long-term.

Working at Bain changed my life. I spent the majority of my time doing “primary research,” talking to the different stakeholders of companies that our investor clients were considering investing in. These included ex-employees, customers, suppliers, competitors, etc. The most important thing I learned at Bain was that if you talk to 50+ stakeholders in a company, you'll get a very good sense of whether it is investable or not.

Yesterday, I talked to a terrific fund manager by the name of Whit Huguley, who founded River Oaks Capital and is based in New Orleans. River Oaks invests in a concentrated portfolio of small capitalization companies and has handily beat its benchmark indices during its existence. I suggest you head over to their website, where you can read Whit’s very insightful letters.

Whit’s approach, with its heavy emphasis on interviewing management teams, resonates with me deeply.

Few investors in the small cap space do serious primary research, and there is so much information out there that is not “insider,” it’s just undiscovered. As investors in this space, we can gain an edge over competition by utilizing the mindset of an investigative journalist - talking to CEOs, ex-employees, etc. - and digging where few have dug. Whit and I noted that so many small cap CEOs will be surprised if you call them, revealing that no one else rang in the last 2-3 years. These dialogues often will give you information that is far more valuable than what you'd find in a quantitative screen or SEC filing.

This is what excites me most about the small cap space, and a heavy primary effort is the value I think I can best provide my clients.

Since we operate on a small budget, we can't use paid expert networks like Tegus or GLG. Instead, we source experts on LinkedIn and offer $50 donations to the charity of their choice. This scrappy approach has worked fine for us so far. We are deep believers in having a "boots on the ground" mindset and think this is what differentiates a long-term fundamental investor.

Apart from a research process heavy on conversing with a company’s stakeholders, I want to talk about what we’re building here at Sophon. Apart from an investment research service, we want to build a community.

Each month, we will be hosting a private Zoom call for our paid subscribers and members, in which our team and portfolio managers in our network will discuss ideas of interest. Our first event will be on January 25th, and we’ll discuss $SKYH, $GIL, $BNED, and $WOSG. We’re looking forward to not only creating an investment research service, but a true “investment club.”

Finally, we do limited consulting work. Our Member tier in our price plan (priced at $7,500) is designed for RIAs and family offices. Apart from the services we provide our paid subscribers, we allow members to submit an idea of interest (any publicly-traded stock, regardless of jurisdiction/market) which we research and provide a write-up on (similar to the “Brief Dives” you can find on our Substack). We work under non-disclosure agreements and vow to not circulate this work. We are capping this service to 15 members only (3 have signed up so far), so if interested please reach out.

We are so excited to work with you, and as always appreciate any feedback you may have.

We hope you have a great New Year’s!