Microcap investing is one of the last inefficient corners of the stock market, and Ian Cassel has spent 25 years in it. On this episode of The World According to Boyar, Jonathan Boyar talks with the founder of MicroCapClub, portfolio manager at Intelligent Fanatics Capital Management, and author of Stock Picker about why the big institutions can't own these stocks, why most microcaps have to be sold within three years even when they work, and what it actually costs a small company to be public (less than the headlines say). Ian walks through a stock he bought after a fat-finger seller dumped 5% of the company in a day, and the 76 stock-promotion mailers he tracked in a spreadsheet. He explains what he looks for in a microcap CEO, why a CEO who owns 20% of the company can still be the problem, and the story of the Judas goat, which is about how not to build a reputation as a stock picker. And Jonathan asks him whether he'd ever take MicroCapClub public. The answer is short.
Key Points From This Episode
- Why microcap investing differs from investing in mid- and large-cap companies.
- The structural inefficiencies Ian believes create opportunities for smaller investors.
- Why Ian views microcaps as particularly suited to investors willing to conduct their own research and form independent conviction.
- The role profitability plays when Ian evaluates microcap companies.
- Why small, profitable businesses might choose to enter the public markets.
- How the research process for microcaps differs from larger cap companies.
- Why management quality becomes increasingly important as companies get smaller.
- How Ian looks for repeat winners and management teams that have previously demonstrated entrepreneurial success.
- Why management changes can provide opportunities to identify potential turnaround situations.
- Why Ian's intention is to hold investments forever, but the fragility of small businesses often makes that difficult.
- The concentration risks that can make microcap businesses more vulnerable.
- Why some microcap companies experience only a "season of winning."
- The importance of knowing when to sell and accepting portfolio turnover.
- Why Ian looks for companies that dominate niche markets and can expand into adjacent opportunities.Ian's investment in IHC and what attracted him to the company.
- Lessons from Ian's investment in disaster-remediation company lnfrasource Holdings around Hurricane Katrina.
- How and why Ian founded MicroCapClub as a private community for experienced microcap investors.
- The evolution of MicroCapClub from an idea-generation resource into a global microcap investing community.Ian's acquisition of Planet MicroCap and his ambitions for its investor events.
- The story of the "Judas goat" and its lesson for aspiring stock pickers.
- Warning signs for investors entering the microcap market and Ian's experience tracking promotional stock reports.
- Why Ian suggests new microcap investors focus on profitable businesses. Ian's perspective on insider ownership and why he does not use a specific ownership threshold.
Links:
To find out more about the Boyar Value Group, please visit www.boyarvaluegroup.com
To learn more about Ian Cassell and MicroCapClub, please visit microcapclub.com
Ian Cassell's book, Stock Picker, is available on Amazon and wherever books are sold.
Important Disclosures:
The information herein is provided by Boyar's Intrinsic Value Research LLC ("Boyar Research") and: (a) is for general, informational purposes only; (b) is not tailored to the specific investment needs of any specific person or entity; and ( c) should not be construed as investment advice.
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Disclosure
This podcast is for informational and educational purposes only and should not be considered investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services. The views expressed by guests are their own and do not necessarily reflect the views of Boyar Research or its affiliates. Boyar Research, its affiliates, employees, and accounts managed by its affiliates may own shares of companies mentioned in this episode. Our vi...
