Sally Kohn: I don't know if a lot of people realize that you're a micre cap fan. For me, as a quant, they're the perfect asset class for a quant because a virtually nobody follows them. Many of the stocks that we have in our microcap portfolio have no analyst coverage at all. So nobody is looking at the numbers. Almost zero institutional investors. It's hard to make money if you're offering a microcap fund,. Because literally, your capacity is really super constrained if you want to trade these in size. In the most liquid category where we find most microcapulary at about 220 basis points of market impact.
Ian Cassel is the founder of MicroCapClub, a community where hundreds of investors have discussions on US and Canadian microcap companies. They also help you become better investors with educational content covering investing strategies, intelligent fanatic CEOs, great investors, and more. Ian is also Founder and CIO at Intelligent Fanatics Capital Management, whose goal is to own the smallest, most illiquid, least institutionally owned, misunderstood businesses that are run by intelligent fanatics.
Show Notes:
- Microcaps are boons for quants
- How Ian fell in love with microcaps
- Managing other people’s money
- Advantages and risks of microcap investing
- Profitability, scarcity, and great stories
- The top-down and bottom-up investment framework
- Not being limited by minimum market caps
- Being a hands-on investor
- Turnovers in microcap portfolios
- PE taking over microcap firms
- Increasing the flywheel of serendipity
- Preparing to be effortless
- Not getting into arguments with people with made up minds
- Being honest about your investment approach
- The “mute” button hack
- Identifying bad management
- Importance of base rates
- Educating about microcaps
- Optimism beats pessimism
- Do macroeconomic factors really matter?
- What is chasing you?
Books Mentioned:
- The Psychology of Money, by Morgan Housel
- The Tao Jones Averages, by Bennett Goodspeed