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Explore the world of small cap value investing, finding great stocks and avoiding 'value traps'. Learn the role of macro in the economy, strategies for generating short ideas, and insights on corporate malfeasance. Discover essential resources for value investing and the challenges in the small cap market.
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- Small cap value investing focuses on misunderstood, mispriced businesses with inflections in products and strong unit economics.
- Small cap investing faces challenges from passive investing, style factors, and market dynamics favoring short-term trading over fundamentals.
Deep dives
Investing in Small Cap Value
Investing in small cap value stocks involves looking for businesses that are significantly mispriced and misunderstood. The sell side tends to overlook this area, providing an opportunity for fundamental edge in small caps. The focus is on businesses with market caps of one to three billion dollars, primarily in the Russell 2000 index. These companies may not be well-known household names, but they offer potential for deep research to add value. The key is to identify businesses that are going through inflections in their products or services, and have strong unit economics and free cash flow. Active management and a rifle approach are crucial to avoid value traps and gain an asymmetric return.
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highlights
Listen to the best highlights from the podcasts you love and dive into the full episode