From Precy Dumlao, Opalesque Asia:

Vigorous research, buying or selling at opportunistic times and patience are the key drivers for alternative investment manager and Chicago-based hedge fund manager AM Capital Advisors that led the firm to achieve a double-digit +41.71 positive performance during the third quarter of 2012, compared to the DOW Jones Index which ended the same quarter at +9.94%, NASDAQ +17.26%, and S&P 500 index +14.44%.

In September, AM Capital’s hedge fund was up + 6.64% versus the DOW index + 2.63%, NASDAQ + 1.72%, and the S&P 500 index at + 2.42%. Since inception as of the end of September 30, 2012 AM Capital's performance is up 59.88% return over a 39 month period versus over the same period of time the DOW index 59.06%, NASDAQ 68.79%, and the S&P 500 index at 56.45%.

The fund attributed the decent market conditions and good stock picking due to research that resulted to the positive gains last month. AM Advisors generated alpha by concentrating mostly on small caps that had a catalyst to move.

AM Advisors President Aaron Miller said in an interview with Opalesque when asked how he managed to record strong gains when other funds, including the big ones, have been struggling, "By conducting vigorous research, buying or selling at opportunistic times, and not being so hesitant."

He explained that AM Advisors, a long/short U.S. stock equity fund, had been focusing its strategy this year by concentrating its portfolio, and thus far 2012 has been a decent year for the firm "despite some of my competitors that are having a difficult time." Miller commented on the current difficult market conditions, "Currently I think these conditions are difficult because there is not much that is cheap and if it is, one has to make sure it is not a value trap. However you still need to stay disciplined with fundamentals and have certain short positions as well. I think the only sectors that have lagged considerably have been gaming stocks, oil service stocks, chip makers, autos, and for profit educations. However I don’t feel profit is going to benefit regardless of who is the next president. If unemployment goes down I think gaming stocks have big upside because they historically can move. I also like oil service stocks from a risk reward standpoint. Where I feel the market could be dangerous is some of the market leaders like Google and Apple have had big moves and there are no geo political issues priced into the market. However if U.S. politicians surprise us and agree in a debt reduction with [Ben] Bernanke’s easing the rally could obviously continue."

Miller was referring to the latest quantitative easing (QE3) announced by the Feds last month to stimulate the national economy as the conventional monetary policy has become ineffective. The fresh round of QE3 was announced by Bernanke in mid-September as part of "Operation Twist", that began in September of 2011 and consisted of swapping short-dated securities and reinvesting the proceeds of older securities.

He also believed that the fourth quarter is going to be difficult for the financial markets. However, Miller said fund managers can still meet the challenges ahead by being vigilant and make extra efforts to locate over or undervalued stocks.

"Market conditions are difficult, but they usually are. Europe is not going to be resolved anytime soon, U.S. debt and politics is an on-going problem, and there are many geo political issues in China, Japan, Israel, and Afghanistan. There’s a lot of risk that’s not priced into the market should something unforseen happen," Miller concluded.