Investing in High Quality Small Cap Growth Companies

This chapter introduces the concept of quality in investing and the importance of a strong management team and reinvestment for sustainable growth. It discusses the development of a business flywheel consisting of five self-reinforcing conditions that increase the odds of long-term compounding. Using a case study of Glow Wand, a successful cloud-native IT consulting company, it illustrates the success factors of a high-quality small cap business.

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Episode notes

Kyle Grieve chats with Rayna Lesser Hannaway about her business flywheel model to identify great businesses, a use case of the business flywheel on one of Polen Capital’s holdings, Globant, the strength of businesses with repeatable sales, the advantages of investing in small-cap stocks, how to deal with valuations in high-quality businesses, how to determine when to exit an investment based on a businesses fundamentals, and a whole lot more!

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

05:27 - A 5-step business flywheel approach to finding great businesses.

05:35 - Balancing a portfolio in the small-cap space based on growth.

12:34 - A breakdown of 3 high-quality small caps: Globant, Goosehead Insurance, and Clearwater Analytics.

16:11 - Popular misconceptions of diversification in small-caps.

29:19 - Why high-quality small caps often are undervalued by the market.

35:32 - Why using 5-year models for growth and valuation projections is so effective.

And much, much more!

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

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