In his recent interview with Vishal Khandelwal, Ian Cassel discussed four top-down, and four bottom-up attributes that he looks for to find the best undiscovered businesses. Here’s an excerpt from the interview:
Cassel: So those are the four kind of top-down attributes, tailwinds, scarcity, story, and undiscovered. And then kind of the bottom-up four which I’ve articulated before and I still kind of stick to these four is:
A business that can grow through a recession. So those are I don’t know it’s probably three percent of companies, and you’re just putting that filter down all of them.
A balance sheet that can weather a storm and act with occasional boldness. Again that’s a tough one too for especially for a micro cap.
A leadership team that… an organization that shows signs of intelligent fanaticism, and so we’re trying to find those great leaders.
And number four, getting valuation, a valuation that can double within three years. So kind of looking at that 25% long-term cagr kind of as the benchmark of what we’re looking to achieve.
And even though I would say that I’m a very growthy oriented investor, whether you’re talking about a business that can grow through a recession, a great balance sheet, a great leadership team, a valuation that can double, those four attributes have just as much to do about survival as growth.
And so you really need to combine growth and survival to find these great micro-caps because they’re all going to be tried and tested so you just need to find them that can survive.
So it’s a combination of looking for growth and survival and so those are… that’s probably the easiest way I could describe my strategy today is combining those four top-down and there’s four bottom-up attributes.
You can watch the entire discussion here:
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