Ian Cassel: Finding Companies That Can Double Your Money In 3 Years

During his recent interview on The Investor’s Podcast, Ian Cassel discusses his investment approach, emphasizing the importance of assessing potential downsides before considering upsides.

He looks for opportunities where he believes he can double his money in three years, often focusing on undervalued companies with strong growth potential. Cassel highlights the significance of management quality, particularly in smaller companies, as a key factor in investment decisions.

He prefers investing in firms with overqualified management teams and a history of success. While each investment situation is unique, he seeks to buy close to the point where a company’s earnings potential becomes apparent to the broader market.

Here’s an excerpt from the interview:

Ian Cassel: Each company is a little bit different, but in general, the overall framework is, well, do I think I can double my money in three years?

But even ahead of that is, I love this. I forget who said it. But looking down before you look up, looking at what the downside is with every situation before you look up and that’s predominantly what I’m doing with every new investment is what is the downside and it can change from investment to investment.

We have one investment that we made, in the open market. It was maybe middle of last year and it was, a company trading at 5 times earnings and obviously it was just cheap because it was growing, and so there’s not much downside there.

There’s other ones that we’ve invested in the past that might not be quite at profitability, but we have comfort because the management team has built up companies in the same industry before they backstop that company financially.

To provide them cash, they don’t need to go into the market with investment banks and raise capital. They have a good growth runway ahead of them. They are growing. And in that case, you can kind of look for a price to sales, which I hate type of multiple, but there you’re putting a bigger bet on the management team’s ability to duplicate what their success they had before.

And in every type of investment we do is, I mean, it really is mainly betting on the people. every small company, the smaller they are, the more important management becomes. And the more the mode of that business is actually the management team or the leader or founder of that business. And so a lot of the, a lot of what attracts us to initially to a situation is the management team and the leadership.

We want to find those overqualified management teams that. Should be running much larger businesses. They just aren’t yet, and maybe this is their 2nd or 3rd or 4th go around. And those are the types of things that we’re, we’re attracted to. So each, each situation is different.

I wish I could give you a magic formula for it. My favorite situations are obviously finding things that single digit that I think are just. just cheap, but again, there’s also screen easily and so you can find them or you can find them where sometimes the financials are a little bit muddied and in the earnings power isn’t quite seen yet, but it will be.

And so a lot of it is just trying to find the point, trying to buy them as close. You can to where the earnings power becomes evident to everybody else.

You can watch the entire interview here: