Invest Like The Best
Episode 24 Investing In Tiny Stocks
Invest Like The Best

Episode 24: Investing In Tiny Stocks

Investing In Tiny Stocks

Ian Cassel is a micro-cap investor and co-founder of MicroCap Club. We cover the idea of an intelligent fanatic, the due diligence process Ian follows when identifying micro-cap companies, and his life philosophy as an investor that lives off of the performance of his portfolio.

This episode is brought to you by:

CFA Institute. CFA Institute is a global association of investment professionals, whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investor's interests come first, financial markets function at their best and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world. The views expressed in this podcast do not necessarily represent the views of CFA Institute.

[00:01:53]  – (First question) – What is an intelligent fanatic and what drew Ian to it for his career.

[00:02:28] – Intelligent Fanatics Project: How Great Leaders Build Sustainable Businesses

[00:04:58] – Why intelligent fanatics is so important to him as a microcap investor

[00:05:32] – Seven Intelligent Fanatics From India

[00:06:00] – What are the most common characteristics shared by intelligent fanatics

[00:07:21] – What drew Ian to microcaps and what unique opportunities does it present

[00:10:52] – What makes this such a fertile but less efficient space to invest in

[00:14:48] – What happens when you buy these small companies with market cap under $50 million

[00:15:51] – What does Ian look for to avoid pitfalls when buying into microcap companies

[00:17:07] – Looking at Ian’s portfolio and the number of stocks and how often he turns them over

[00:18:49] – Exploring the process and characteristics that are important to Ian when choosing a company that he will take a position in

[00:22:43] – How is Ian’s valuation approach different from a systematic strategy to choosing microcaps

[00:25:09] – Ian’s price discipline and when does something become too expensive

[00:26:17] – Does statistical achievement matter

[00:26:40] – What are the reasons to sell a position in a business

[00:29:37] – Does intuition play a large role for Ian when exploring a company

[00:30:32] – Does Ian think about going into the private company space

[00:32:00] – What does the average microcap investor look like and why does Ian not take outside money for his investments

[00:32:40] – MicroCapClub

[00:33:45] – Ian explains how he got started and why he is focused on Microcap investments

[00:37:09] – What was the next step for Ian that led him into analyzing larger microcap investment

[00:40:09] – After landing on Ian’s radar, what does he do in terms of approaching a new business

[00:43:06] – Any industries or companies that Ian actively avoids

[00:44:30] – The formula for what makes a company un-disruptable

[00:45:42] – What are the most common dimensions of an enduring moat

[00:47:58] – What is Ian’s philosophy when it comes to the investment of his time and how frugality plays into it

[00:52:33] – The power of his persistence and luck to be able to do this

[00:54:13] – The most memorable individual day for Ian

[00:55:56] – Kindest thing anyone has ever done for Ian

[00:58:01] – Floats and Moats

[00:58:55] – Some of the publications that have changed the way Ian thinks and acts

[00:59:22] – Zero to One: Notes on Startups, or How to Build the Future

[00:59:45] – How to Win Friends & Influence People

[00:59:54] – Think and Grow Rich

[01:00:42] – Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers

[01:01:00] – Getting There: A Book of Mentors

[01:01:57] – What company should people go back and look at old company reports to help them understand how things flow

[01:03:24] – 100 Baggers: Stocks That Return 100-to-1 and How To Find Them

[01:03:35] – 100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities

Investing In Tiny Stocks

Introduction

Patrick
My guest this week is Ian Cassel, a microcap investor who is always on the lookout for tiny companies which are run by men and women who are what he calls "intelligent fanatics." We discuss what Ian looks for in managers, why investors may want to consider microcap stocks as a category, and the advantages of a frugal approach to life. For show notes on this episode, visit investorfieldguide.com/ian. And now, please enjoy my conversation with Ian Cassel.

Intelligent Fanatics

Patrick
Well Ian, thank you very much for doing this with me today. We're going to cover some interesting uncharted waters for the podcast, specifically the public microcap investing space. Which will be a lot of fun because obviously, it's a part of the market that is probably not even a part of most people's portfolios. The collective market cap of all microcaps is like one mega-cap stock, so it's often the case that these companies are undercovered. But I want to start with this idea that you have, also the title of the book that you wrote, called "Intelligent Fanatics." And maybe a fun way to do it since I just finished the book would be to read a quote from early in the book from one of these intelligent fanatics. His name was John Patterson, who some will be familiar with. I had heard the name but I didn't know the story, and it's really well told in the book. He ran the National Cash Register Company, and this is from 1888, so this is a well-season quote. He said, "The business that is satisfied with itself, with its product, with its sales, which looks upon itself as having accomplished its purpose, is dead. The actual burial may be postponed, but it is dead because it is not going forward. To my mind, nothing can ever be good enough. I am always dissatisfied. I preach dissatisfaction. I can always see where something might be better, and therefore, our business is never at rest, and I never want it to be. The throbbing heart of a business is the intense desire to do better. When that desire ceases, the heart stops beating." So pretty clear mission statement or character type from John Patterson. Building off that, you could tell us how you came to this idea, what it is, and how you came to this idea of an intelligent fanatic.

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