The  Case  For  MicroCaps  

By  Ian  Cassel  

My  Background  •  Started  inves8ng  when  I  was  a  teenager.    •  Worked  for  a  broker/investment  advisor  full  8me  while  I  

aCended  Millersville  University  for  Economics.  Graduated  2003.    

•  Villanova  University  while  working  on  my  MBA,  Graduated  2005.    

•  Founded  Ian  Cassel  LLC:  Advised  several  microcap  companies  (2005  –  2008).    

•  Full  8me  investor  (2009  –  Present)  •  Founded  MicroCapClub.com  (2011  –  Present)  

Investment  Philosophy  

•  Invest  where  inefficiency  is  greatest  

•  Exploit  informa8on  advantages  

•  Perform  original  fundamental  research  

•  Invest  in  growth  with  definable  catalysts  •  Keep  management  teams  on  a  short  leash  

 

Small  Cap  Opportunity  Set    

Large  Cap  

(>$5B)  600  stocks  

 Mid  Cap    

($500M  -­‐  $5B)  1800  stocks  

 

Small  Cap    (<$500M)  5000+  stocks  

Investors  are  over-­‐exposed  to  large  caps      Market  efCiciency  is  greatest  

I  aim  to  exploit  the  many  inef=iciencies  of  this  under-­‐exposed  segment  

•  Small  cap  universe  is  8x  the  size  of  large  caps  

Small  Cap  Outperformance  

Small  Cap  Outperformance  

Market  Correla8ons  

•  Small  and  Micro  Cap  Equi8es  historically  exhibit  low  correla8on  to  the  S&P  500  •  Correla8ons  are  lower  in  downmarket  periods,  implying  capital  preserva8on  

opportuni8es  •  Adding  Small  and  Micro  Cap  Equity  exposure  may  offer  por_olio  diversifica8on  

benefits  to  investor  por_olios    

Find  The  Trend  •  I  try  to  find  emerging  consumer  trends,  

financial  trends,  industry  trends.    

•  Once  I  find  a  trend  I’m  confident  in,  I  find  the  microcap  companies  that  are  the  benefactors  of  that  trend.    

Find  the  Company…..  

Self-­‐Cinancing  growth  and  clean  capital  structure  

Low  institutional  ownership  (undiscovered  by  larger  investors)  

Highly  incentivized  management  teams  with  proper  alignment  of  interests  

Products  or  Services  are  the  best  in  peer  group  

Due  Diligence  

Analyze  public  filings  

Conference  Call  with  Management  

If  I  can,  try  the  product  or  service  

Try  to  speak  to  one  or  more  customers  (Channel  Checks)  

Company  Visit  

MicroCap  Isn’t  Easy  

What  Is  MicroCapClub?  

•  Launched  July  2011:  Quality  Members,  Quality  Stocks,  Quality  Content  – Members  Forum:  Exclusive  club  for  experienced  microcap  investors  to  share  and  discuss  ideas.    •  Currently  over  140  members  discussing  about  80+  microcap  companies.  

– Public  Blog:  Unmet  need  in  the  market  place  to  educate  investors  about  the  MicroCap  space.  •  Educa8onal  ar8cles  on  microcaps  •  Interviews  with  opinion  leaders