A Conversation with Michael Melby of Gate City Capital Management

Jan 10, 2025

Michael Melby, founder of Gate City Capital Management, shares his journey from a small Montana town to successful microcap investing. He discusses the principles of deep value investing and the significance of understanding management teams beyond just numbers. Melby emphasizes the importance of rigorous financial analysis and personal relationships with investors. He also reveals how company visits impact investment decisions and the evolving strategies his team adopts, blending qualitative and quantitative insights for long-term success.

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ANECDOTE

Michael's Upbringing

Michael Melby grew up in Glendive, Montana, a town of 5,000.
His parents were high school teachers, fostering an academic environment.

ANECDOTE

Early Interest in Investing

Michael's father sparked his interest in investing through a stock-picking competition with students.
He pursued finance at Notre Dame, aiming to become an equity investor.

ANECDOTE

Learning from the GFC

Michael worked at Deutsche Bank during the pre-GFC era, witnessing the dangers of debt and leverage.
This experience shaped his aversion to debt in his investment strategy at Gate City Capital.

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Michael Melby is the founder and portfolio manager at Gate City Capital Management. Gate City has produced a 22.4% net annualized return since inception (September 2011), compared to 14.8% for the S&P 500. During this discussion we talk about Michael’s beginnings growing up in a small Montana town, education and early experience, launching his fund, his strategy and process, and the decision to close the fund to new investors. Join MicroCapClub and unlock the ability to listen and participate live in these discussions.

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About Michael Melby:

MicroCapClub member since 2015

Firm: https://www.gatecitycap.com

Chapters: 00:00 Disclaimer 02:00 Intro 03:55 Michael's Background 14:08 Professional Journey 18:45 Gate City Capital's Investment Philosophy 22:45 Investment Process & Examples of Investments 37:00 Team and Operational Growth 46:21 Long-Term Strategy and Firm Discipline 1:07:20 Fund Management Philosophy 1:14:38 Tools and Community and Collaboration 1:15:45 Key Metrics and Performance 1:20:20 Advice for Aspiring Fund Managers & Expanding the Fund

About MicroCapClub MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $500m market cap) trading on United States, Canadian, European, and Australian markets. MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. Since 2011, our members have profiled 1200+ microcap companies. Investors can join our community by applying to become a member or subscribing to gain instant view only access. MicroCapClub’s mission is to foster the highest quality microcap investor Community, produce Educational content for investors, and promote better Leadership in the microcap arena. For more information: https://microcapclub.com

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