In his recent interview on The Investors Podcast, Ian Cassel explains why microcaps are the small investors playground. Here’s an excerpt from the interview:
So there’s this advantage to a small retail investor that’s astute, that knows how to read financial statements to find these really good companies that are unique, that are growing, that are profitable, that are small, because the institutions are kept out of them.
The institutions can only buy them once their companies get larger, their stocks become more liquid, and then they can buy them. So it’s one of the only areas I think in investing where the small retail investor has a distinct advantage because the institutions are almost kept out of the city gates.
You have this playground to yourself, and that’s what attracted me to it 20 years ago is somebody like me could get an advantage over other people, and I’m not the only one.
I mean Warren Buffett, Peter Lynch, Joel Greenblatt, all these great investors, most of the great investors got started investing in microcaps because this is an area in their early years when they were imagining small sums where they could get an advantage over others, and that same kind of structural advantage still persists today and I think it might be why is this kind of space kind of broad brushed kind of as this sleazy ecosystem.
I think it maybe is because they are mark to market everyday, they are public, you see the amount of failures, you see the stocks decline on a daily basis.
You can listen to the entire discussion here:
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