Lessons from Ian Cassel on Microcap companies


  • My goal is to own the smallest, most illiquid, least institutionally owned, best businesses I can find that are run by intelligent fanatics

  • The key to outsized returns is finding great companies early, when they are small companies.

  • With many microcaps you have to place your bet before you have full conviction

  • Illiquidity is a big driver of outsized returns.

  • The smaller the company the more you should focus on management and qualitative analysis.

  • I don’t like small companies that operate in capital-intensive industries like mining, life sciences, and oil & gas. I generally stay away from pre-revenue story stocks.

  • Microcaps that dominate a small market niche that is expanding tend to drive quality down to the financials.

  • It’s imperative to understand and buy-in to the CEO’s strategy and vision for the future. A qualitative attribute in most of my winners was a CEO that figured out how to swim on his/her own.

  • 90% of microcap management teams say too much and do too little. The key is investing in management teams that focus on the long-term and let their execution do the talking.

  • For me a great mental hurdle is limiting my investments to those I think will increase 500% in three years if I’m right and increase 100% if I’m wrong. This is my margin of safety.

  • To achieve maximum capital gains, your intention with every purchase should be to hold for years. You will have an edge on most investors if you make investments based on expected 3-5 year returns instead of 12-month returns.

  • Investors tend to over-analyze when stocks are going down (fear) and under-analyze when stocks are going up (greed). ‪‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬The hardest part of investing is holding through these times, embracing boredom and inactivity, and distancing human nature-emotion from investment decisions.

  • I could give you several examples where waiting days, weeks, months, cost me a lot of money. It’s not just the money but the time. You can’t get that time back.

  • Confidence and conviction are necessary to hold multi-baggers, but you can’t let it blind you. There is nothing wrong with falling in love with a stock; you just need to be prepared to divorce quickly.

  • An investor’s goal should be to make as few investment decisions as possible but making few decisions doesn’t mean making slow decisions.

  • If you want to be a better long-term investor, get rid of all distractions that promote short-term thinking. Focus on owning the best companies you can find.

  • Risk occurs when you don’t know what you own. Buffett says to focus on what is knowable and important.

  • In general, microcap CEOs have a tendency to over-promise and under-deliver. The ones that talk too much often do too little. Don’t fall in love with storytellers.

Source: https://www.safalniveshak.com


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