mYCharts - April 27, 2020
Surviving as an Investor with Ian Cassel
FEATURING: IAN CASSEL
— Ian Cassel (@iancassel) April 19, 2020
Q: Tell us about yourself and what sparked your passion for micro cap investing?
A: In 1997, I was a teenager in high school investing in small cap technology companies during the dot-com bubble. When the bubble burst, these companies became micro caps, so you could say I was forced into micro cap investing. In college, I stumbled upon a micro cap called XM Satellite Radio which would later merge with Sirius Satellite Radio (SIRI). I saw the CEO was presenting at an institutional investor conference, so I had fake business cards made, put on my suit from my senior photos, and took a bus from Lancaster, PA to New York City. Somehow, I was able to have a 1-on-1 with the CEO. I was starstruck. I took what I had left after the Dot Com crash and bought XM Satellite stock at $1.78 per share. 14 months later it was $34 per share.
The win was all luck, but the ability for a small-time investor like me to meet with management is what got me hooked. I’ve been meeting with micro cap management teams ever since. I learned to invest by losing my money over and over again and making it back. My goal early in life was to become a full-time private micro cap investor which I achieved in 2008.
Q: The chart above shows how investors can still find value in micro cap stocks. What’s your advice for investors who are interested in getting started with micro caps? Are there any data points to pay close attention to?
A: Warren Buffett, Peter Lynch, Joel Greenblatt and many other great investors started their careers investing in micro cap stocks. Many of the world’s greatest companies like Berkshire Hathaway (BRK.A/B), Amgen (AMGN) and Intuitive Surgical (ISRG) started as micro caps. Most of the world’s best-performing stocks, including Walmart (WMT), Netflix (NFLX), and Monster Beverage (MNST) were microcaps. I believe micro cap is where greatness begins. Half of all public companies are micro caps and yet few investors realize these small companies exist.
Unlike private equity and venture capital where you have to be wealthy and well-connected to gain access – micro cap is the opposite. Institutional capital can’t invest in micro cap companies because they are too illiquid. Micro cap is one of the last investment arenas where small intelligent investors have a structural advantage. Within micro cap you can find deep value stocks, value stocks, growth stocks, turn arounds, story stocks, SaaS companies, mining companies, life science companies, services companies, etc. My advice for beginners is to find an area that you naturally connect with and start digging.
Q: What is MicroCapClub? Can you share a little bit about your community?
A: I founded MicroCapClub.com in 2011. MicroCapClub is an exclusive forum for experienced micro cap investors focused on micro cap companies (sub $300m market cap) trading on United States, Canadian, UK and Australian markets. MicroCapClub was created to be a platform for experienced micro cap investors to share and discuss stock ideas.
Q: How are you approaching investing during the bear market? Has your approach changed over the past few months? If so, how?
A: I recently gave a presentation called, “The Art of Survival” at SNN Wire’s recent Planet MicroCap Showcase Virtual Investor Conference. In the presentation, I talk about what investors can learn from companies that have survived the past 50,100,1,000+ years and how my strategy has evolved.
Bear markets have had the biggest impact on my investing and have helped define what I look for in a company. In general, I look for companies with the following four attributes:
- A business that can grow through a recession.
- A balance sheet that can weather a storm and act with occasional boldness.
- A leadership team and organization that show signs of intelligent fanaticism.
- A valuation that can conservatively double in three years.
Inexperience almost always underestimates risk. The more experience you gain, the more you respect what you are up against. I can’t control the market. I can’t control stock prices. I can only control where I’m invested. When you are invested in businesses with these four attributes you know your portfolio can weather any storm.
Q: How do you use YCharts?
A: I’ve been a paying YCharts subscriber for three years. I use YCharts every day and love it. For me, I enjoy the intuitive user interface and the ability to upload my Watchlist of stocks and have all the news in chronological order. I also use Fundamental Charts quite often to get a visual representation of trends in revenue, earnings, outstanding share count, etc. I like YCharts because it’s really good at the simple things that are important to me.