We believe that MICROCAP COMPANIES, the smallest of all publicly traded companies, provide the most attractive investment opportunities for individual investors of any asset class in the world. The problem, however, is that not many investors know about, understand, and/or appreciate these companies and thus they are incredibly under-followed.
Many of the best investors ever, including Warren Buffett and Peter Lynch started their careers investing in microcaps. Some of the best performing companies ever, including Berkshire Hathaway, Wal-Mart, Apple, started as small microcap companies. Today, North American microcap companies employ over 2.8 million jobs. More jobs than Google, IBM, Home Depot, Berkshire Hathaway, AT&T, Pfizer, Cisco, Microsoft, Boeing, General Electric, and GM combined. All Great Companies Started As Small Companies, and it’s time people changed their perception of this unloved equity class. (Source)
Scott Felsenthal and Todd Massedge both share in the frustration that there are an abundance of fantastic, small public companies that are doing amazing things and becoming very successful, yet in general the investing public doesn't know a damn thing about the company. Even worse, perhaps some have heard of these companies but they would never consider investing in them because they are so small and considered a "microcap". This thinking is seriously flawed and as a result Scott and Todd set out to create Why Microcaps? to do their part in helping to bridge the gap between the reality and the perception of microcaps -- hopefully introducing this asset class to investors who have never heard of and/or never considered investing in such companies.
"In investing, what is comfortable is rarely profitable."
— Robert Arnott, FOUNDER of Research Affiliates
So, Why Microcaps?
Ever wonder how Warren Buffett got his start? I’m sure you might think he invested in safe, blue chip companies his whole life. That couldn’t be any further from the truth. Buffett got his start by investing in small, little known companies with a lot of value that the market just couldn’t see. He understood there was a massive advantage by being a smaller investor, managing smaller sums of money. What was it? He had the ability to invest in very small companies, often stuck in confusing situations caused by a lack of readily available information. More importantly, he understood that by only managing small sums of money, he was able to invest in names that some of the brightest minds on Wall Street couldn’t, mainly because they actually managed too much money.
This is your advantage as a microcap investor: The ability to invest in little followed companies, with massive potential, that the best and brightest on Wall Street can’t even touch.
"It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."
— Warren Buffett
Invest in Microcaps
If you want to put yourself in the best position to generate significant long-term investment gains, you have to work hard and find microcaps with a great team guiding the ship with a phenomenal vision. You have to embrace illiquidity and volatility and be patient when buying your positions in these companies because it can take some time to do. And you have to be patient, very, very patient as the company's vision becomes a reality. Buy when illiquid and sell when institutions want to buy your shares at much higher prices...this, my friends, is how to position yourself for significant wealth creation by investing in microcap companies.
It's hard, it takes incredible amounts of due diligence, and one hell of a lot of patience. But you become smarter as an investor and a person throughout the process of microcap investing. And you may just create a small fortune for yourself throughout the process as well.
At least by investing in microcaps you are putting yourself at a SIGNIFICANT ADVANTAGE to do so-- something you can't say by investing in any other asset class.