Thank you for another inspiring article. Although I primarily invest in ETFs, your articles provide valuable insights into different types of investing and teach me how to think critically about companies themselves. I have a one question for you, Iwas also wondering if you could briefly describe your approach to investing in such small companies. My broker doesn't offer these microcaps in their portfolio. Do you use a specific tool or platform for accessing them?
Thanks for your message, I really appreciate that and also kind words. My approach is simple. I want to own growing companies for non-growth multiple where I can at least reasonably predict the near future (think in chess moves, you dont think behind few moves ahead), or extremely cheap companies that are lesser quality (less than 5x earnings). I believe micro-caps are usually cheap for reason but you can find lots of inefficiencies along - liquidity most absurd one. I also pass on lots of cheap stuff because I am not sure what will happen (for example $zomd.v). But I always learn ane change my mind quickly when I discover something. That being said, I believe we need to have high hurdles when investing in micro-caps (call it margin of safety). My approach is very simple as I dont love to complicate things. If you want to know more there is my letter of 2023 recap where I describe this closely. I use IB for my investing, which usually offers most of stuff.
Dear Jakub,
Thank you for another inspiring article. Although I primarily invest in ETFs, your articles provide valuable insights into different types of investing and teach me how to think critically about companies themselves. I have a one question for you, Iwas also wondering if you could briefly describe your approach to investing in such small companies. My broker doesn't offer these microcaps in their portfolio. Do you use a specific tool or platform for accessing them?
Best regards,
Tomas
Dear Tomas,
Thanks for your message, I really appreciate that and also kind words. My approach is simple. I want to own growing companies for non-growth multiple where I can at least reasonably predict the near future (think in chess moves, you dont think behind few moves ahead), or extremely cheap companies that are lesser quality (less than 5x earnings). I believe micro-caps are usually cheap for reason but you can find lots of inefficiencies along - liquidity most absurd one. I also pass on lots of cheap stuff because I am not sure what will happen (for example $zomd.v). But I always learn ane change my mind quickly when I discover something. That being said, I believe we need to have high hurdles when investing in micro-caps (call it margin of safety). My approach is very simple as I dont love to complicate things. If you want to know more there is my letter of 2023 recap where I describe this closely. I use IB for my investing, which usually offers most of stuff.
All the best,
Jacob