Guide Your Microcaps Investing The Cassel Way: 3 Tips from The Expert

 

If you have spent even a small portion of time in microcap investing, chances are you probably have come across the name “Ian Cassel”. An American business owner, founder of Micro cap Club and CIO of Intelligent Fanatics Capital Management, Ian is a well-known full-time microcap investor. With over 15 years of experience in investing in microcaps and a full-time investor since 2008, his financial hunting ground is solely dedicated to micro and nano caps.

 As far as microcap investing is concerned, we all probably will agree that this is one game that is not for “chickens.” As Ian would say, “When it comes to investing, don’t be a chicken, be a hawk”, we will talk about the approaches this long-only, quality focused investor uses to guide his investment decisions through this inherently risky area.

BUSINESS PERFORMANCE AND STOCK PERFORMANCE ARE DIFFERENT

Sustainable big investors have a certain specific characteristics: they seek for long-term revenue and earnings growth that come with little to no dilution. Ian encourages investors to ask themselves the following question before holding onto a position- “is this business making more money per share than it did a year or two years ago?”. 

The inherent criteria that separates a successful investors from others is that he/ she can differentiate business performance from stock performance. He believes that great businesses have great stocks and always get overvalued. This is where his hawk eye reference makes sense. Its vital to make investing decisions based on business performance and not through stock performance.

VALUE SWIFTNESS OVER BEING RIGHT

Investing can be pretty much be like an astrological reading where it requires investors to be soothsyaers. They need to be able to predict what people are going to think before they even know it. This indicates that you need to buy investments early before it becomes obvious in the market. While playing with microcaps, investors must always keep their ego to the minimum. Your desire to make quick decisions must dominate over the desire to be right. A smart investor is able to identify when he/ she is going to be wrong quicker. One thing to remember in investing is that the market loves to humble egoistic investors.

SEEK FOR THE “INTELLIGENT FANATICS”

For investing in microcaps, Ian Cassel is always on the lookout for companies run by men and women who are what he calls, “intelligent fanatics”. He likes to invest in management teams that focus on the long-term and let their actions do the talking. Following is the formula he follows:

Intelligent fanatics = (Long-term vision+ Focus+ Energy+ Integrity+ Intelligence) * Execution

The biggest mistake that most investors tend to make is to mistake charisma for an intelligent fanatic. Especially, the microcap space is filled with people with big mouths who do very little. On the contrary, intelligent fanatics needn’t be charismatic at all. They let their execution do the talking. 

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