YouSaid · the spoken record

Ian Cassel

lines on the record: 75
first: 2017-02-14
most recent: 2017-02-14
sittings or episodes: 1
sources: podcast

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“Really grow by reinvesting their internally generated cash flows back into themselves at high rates of return. The simple compounding compounder. And then probably the next thing is I try to find companies that have balance sheets that have little debt on it. I've always enjoyed Peter Lynch's quote, which is, it's hard for a company to go bankrupt when they don't have any debt. And so I tried to, I found that to be true, you know, travel light, travel far, as they say. And also companies that have a clean capital structure, a clean share structure, they don't have very many shares outstanding. Their owner operators treat their shares like gold. They have a very low percentage of their diluted share count in the form of options or warrants or preferred shares or things like that. They just treat their shares like gold. And then, you know, really the last two, something we already talked about, but no institutional ownership, preferably, because that means preferably zero. Yeah, the lower the better.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Their market means it's a small market. And that's the case here. The reason why I like to look at companies that dominate a small market is it's somewhat vets the management team for me, which is a big risk in microcap investing. Because if a company is dominating what they're doing, it means that management has at least enough competence to either develop the market that they're in or take market share away from a competitor. So it's a great way of kind of qualifying management, at least historically, to what they've done. And they also just tend to have a nice moat around their business, usually a few things that provide a moat and also the companies that dominate their market generally have pretty good high quality fundamentals and financials as a company as a whole. But I'm not looking just to invest in a company that dominates a market that's not growing. I want to look for a market that's also growing. So I'm looking for companies that can sustain a double-digit growth rate top and bottom line.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I'd like to steer clear of individual names because these things are still pretty illiquid. But I can give you the characteristics of what I look for. I think we've hit on intelligent fanatics. Obviously, I'm looking for an exceptional owner operator. And normally look for management ownership to be 20% plus of the business. I don't have to tell you. It's just, you oftentimes find better management teams when they own a big chunk of the business because they make better long-term decisions for shareholders. And so that's why I pay close attention to investing in mostly founder-led companies. And that's something that's normal in most small microcaps. I would say 80% of them are probably founder-led. So you just run into that quite a bit. The second thing is I look for companies that dominate the market that they're in. The book zero to one, but Peter Thiel really helped define this for me. It's something that I was sort of doing before, but after reading that book, it helped define that this aspect of really trying to invest in businesses that dominate a market and kind of much similar to what he said in the book, you know, for a microcapp to dominate.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“It definitely was. I mean, when I look at my, I keep an investing journal. And when I look at my biggest mistakes, it's when I bent my roles and started looking at eight out of tens and seven out of tens. And I rationalized my way into mediocre investments. And that's how you get yourself in trouble. Keep the hurdle rate for incoming investments as high as you can and don't be afraid to say no to a lot of things because you have to.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“My largest position that I hold today is a company that I've owned since 2010, the second largest position that I own today is something I've owned since 2012. And then there's a couple other ones that are probably in that two-year timeframe. And I've only swung the bat once at a new idea in the last two years. It was about six months ago”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I'm a little bit different than many investors in the fact that I'm fairly concentrated, and people that know me probably are laughing right now because I'm a very concentrated investor. I primarily invest in the best four or five or six companies that I can find and try to hold them for the long term. So the way I do things isn't right for everybody. I often say the more experienced you are, the more concentrated you can be. And so it can be a difficult place until you really have your strategy refined and defined.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“I primarily look at just the quality of the business, and I don't use screens the way I generate ideas has historically been through just kind of word of mouth, talking to a group of friends that also invest in microcaps, public and private forums, reading press release and SEC filings. My partner at Microcap Club, I mean, he's a full-time investor. He literally reads every SEC filing and press release on every microcap company in real time manually as they come out. And it's just a lot of work, but that's the way he can find these inflection points and businesses when press releases come out. And so primarily, those are the avenues that I've found ideas. But really, it's really just setting a high hurdle rate for my incoming investments on a quality measure of that business. And, you know, I look at seven or eight different things. And if you have your investment checklist of 10 things that you look for, keeping the bat on your shoulder unless you get a 10 out of 10.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“For the most part, I don't think about the illiquidity as much. I don't think about illiquidity I think about if I'm going to be right and I just focus on is my thesis correct? Because what happens is you have a management team that performs the fundamentals improve, the stock goes up and the liquidity goes up. It's just a function of what happens you probably know that too. You know a stock that's at 50 cents trained 10,000 shares a day is going to be at $2 trading $200,000 a day. It's just how the market functions. And one of the reasons why I pay attention to the sub 50 million is because there's no institutional investors in this area. And that's, I basically go where the illiquidity is greatest, which is the sub 50 million level. And there's a big difference between a 20 million market cap and a $200 million one. Usually when you get up there, they become more efficient because they're institutionalized. Usually by 200 million, you're 30-40% institutionally owned, you're indexed through the Russells, they're fairly liquid by then.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's one of the reasons why I, in particular, with my personal investing strategy, focus on the smallest 20% of the microcap space, those companies that are sub 50 million market cap, which believe it or not, there's still 7,000 companies that are below 50 million market cap, which is still more companies than that trade in the New York Stock Exchange and the NASDAQ combined. So, there's still a lot of companies”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“1972 at approximately 3,000 companies and analyzes those companies by different categories such as value, momentum, liquidity, volatility, the market cap size. And you can go to the website and pull it up. And one of the most interesting takeaways from it is the part that he analyzes these companies based on the market cap and liquidity levels. And what he found was since 1972, the best performing area to be in as a whole was small, illiquid companies. And they averaged 17.8% or something like that. But I think interestingly enough is the fact that the worst performing area to be in was small liquid companies. So I think one of the main takeaways there is that liquidity kind of trumps size as a return predictor. It's not the fact that these companies are small that presents opportunities because they're illiquid and that's why there's opportunity there.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's one main reason which I'll spend a bulk of my time on. And the reason why it's really been a less efficient market for so long and why it will continue to be something you hit on, which is larger, smarter money can't invest in these small companies because they're too illiquid. And the reason why there's opportunity for extraordinary returns is because of illiquidity. That's why, for the same reason why people think it's risky is the reason why there's opportunity. And if you ever want to read some interesting white papers and research studies on this, I'd point you towards Roger Ibotson, who's a Yale finance professor. He's the CIO of Zebra Capital Management. And he's a pretty distinguished author. He wrote some books. I think he won the Graham and Dodd Scroll Award seven or eight times. But he's put out some really interesting research papers. And one of them in particular, which he updates annually, which makes it very useful, is he looks back since”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Like Papa John's or Buffalo Wild Wings, even IMAX, Patrick Industries, which is up 18,000% since 2009. So I think when you hear those kind of qualitative framework around that, I think you get a different picture. That's just a realistic one. Obviously, there's a lot of risk in the space, but I think people with a firm fundamental financial understanding that can read a financial statement can do well investing here.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Wasteland of insignificant companies that are unimportant, that are run by a bunch of sleazy, slimy operators that shouldn't be public in the first place. But I think that everybody can agree 2.8 million jobs is very important, very important to the economy. And then taking it a step further, I mean, most of the best investors ever got their start investing in microcaps. Warren Buffett, Peter Lynch going down the line to Joel Greenblatt. They all started investing in small microcap companies. You know, it's how they built their initial wealth and how they built their initial capital. And even the best companies ever performing companies ever started a small micro cap companies. Walmart, Cellgene, Amgen, even a jazz pharmaceuticals just in the last six years. And so this is a vetted investment class, the best investors started their careers here. And even in the present day, if you were to evaluate the best performing stocks in the last 10 years, those companies that have gone up 1,000% or more, approximately 80% of those companies originated out of the microcap space.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“I just like to kind of maybe provide more of a realistic picture of what the space represents. If we were to look at all the public companies in North America, that includes the United States and Canada, there's approximately 20,000 public companies, and roughly half of those companies are microcaps, so around 10,000 microcap companies. And you mentioned it earlier. If you actually take all those 10,000 microcap companies and roll them up into a ball and form one company, it would be about the size of Google. So about a $550 billion company. And so that kind of goes to show how large and how small the space really is. But another interesting thing is that if you were to take those companies, those 10,000, roll them up into a ball and add together the amount of jobs that they employ. It's very significant. It's around 2.8 million jobs. And even though a lot of the financial media, the regulators even, they like to broad brush this whole space as some uninvested.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. It's a good question. And I believe the microcap space has been an inefficient or less efficient marketplace for decades. And I think it's going to continue to be that way for a long, long time to come. And I think it's for several reasons. And I'll probably start with maybe the less significant one first, and that is I tend to believe that there's a really big misperception about what the microcapp space is about, oftentimes referred to by the derogatory word penny stocks. There's been quite frankly an allowed assault on the microcapp space by the financial media, by the regulators, by a lot of people that have scared away a lot of investors from this space, even in the last seven or eight years. It's gotten worse. And so I think just that aspect alone is create more or even a less efficient market than there was probably even 10 or 20 years ago. But if you don't mind if I would get on top of my soapbox maybe for a minute.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“That seem to just continue on as the company grew and prosper And a lot of these intelligent fanatics that we highlight in the book, I mean, they didn't operate in sexy industries. We're talking about steel or airlines or whatever you call it.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“And their ability to innovate and just stay small, even though they were large companies. And I don't want to say either that there's a strict model to it. There's a lot of luck involved. Jeff Bezos even talks about how much luck was involved in Amazon. But I think there is at least somewhat of a blueprint to see how these”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Would say they just had a firm understanding and vision. Commitment and perseverance towards what they wanted accomplished in their businesses. Their ability to attract talent around them at the most opportune times to be able to execute and really grow a decentralized organization and create a culture that everybody kind of worked towards one common goal, which is harder and harder as a company grows.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that really reintroduced the term to me. And then we just decided, you know, let's look at the intelligent fanatics that Charlie Munger and Warren Buffett both mentioned in their speeches and their writings. And let's retell their stories, trying to find the information that we can find either in books or articles or case studies that were written prior and retail those stories. And that's...”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so then, going back to the intelligent fanatics book, Sean and I had a similar connection with the term, and it got reintroduced to us maybe 18 months, two years ago by professor and fund manager Sanjay Bakshi, who wrote a great article covering some intelligent fanatics in India”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“And so a lot of my time is spent evaluating founders and management teams of these small companies. And I really just wanted to dive in just for my own investment purposes to try to figure out, is there some commonalities that I can at least apply to my investing that will allow me to be able to find these intelligent fanatics that are running microcap companies sooner than other investors?”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“Really, it's the idea of going to see how they built these businesses, but really how they were able to sustain that competitive advantage for such a long period of time, which as you and I both know, it's really hard to be a market leader, let alone sustain it for that period of time. And the reason I got so interested in that concept itself was just because I'm a micro cap investor, I primarily am looking at small emerging companies.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“And oftentimes not dominating what they did, the market, the niche, the product category for one or two years, but ended up really being a market leader in what they did for decades, 20, 30, 40, 50 years.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say that I first stumbled around the concept of intelligent fanatics when I was talking to my co-author Sean Eddings. And the term intelligent fanatic was first used by Charlie Munger 10 or 20 years ago to really explain an exceptional entrepreneur, an exceptional founder, somebody that grew a business from something of insignificance to something that is significant.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd be happy to. And first, I just want to thank you for having me on the program. I'm a big fan of the podcasts. It's obvious when you listen to some of your podcasts the time and effort and energy that you put into making them. You can see it on the quality on the other side, so I appreciate it.”
2017-02-14 · Invest Like the Best · Ian Cassel – Investing In Tiny Stocks - [Invest Like the Best, EP.24] · IDENTIFIED FROM THE TRANSCRIPT · source