#337 - Ian Cassel - Founder @ Intelligent Fanatics Capital Mgmt - The Art of Microcap Investing

Chris Powers: You didn't grow up Amish; you grew up in the brethren. Can we start there?

Ian Cassel: Yeah. 

Chris Powers: I just thought it was because you put it as one of the most exciting things, and I have it ranked number one in the lives that you've lived. You grew up in an Amish community, right? 

Ian Cassel: Well, I wasn't Amish, but so Lancaster County, 500 000 people in Lancaster County, about 30,000 of them are Amish.

And so, the Amish tend to gravitate to their communities. They're also very touristy areas because the number two industry in Lancaster is tourism. So people come in to stare at the Amish, watch them build furniture and milk a cow. 

Chris Powers: Really? People travel to watch? 

Ian Cassel: Oh yeah. It's a big tourist thing. And so you could travel through our county and the county is big. It's about the size of Rhode Island. So it's a big county, but you could travel through that county in 50 different ways. Never see an Amish person, you know, because they hover around in four or five or six other communities. But it's a fascinating culture. I mean, they're growing up. The people right behind us were Amish, and they were just very kind people. And when you think about the Amish people, they don't have any vices. All they focus on is family, God and their business. There are no distractions.

There's no internet. There's no worrying about their perception on social media. There's nothing. No, nothing. So, when you think about it, if you just focused your life on those three areas, what would you do? And they're the most competitive people in business you'll ever meet because it gets dark When the sun goes down.

They go to bed. Yeah. And when the sun goes up, whether it's 5 AM or 7 AM due to daylight savings time, they get up, and in the meantime, they're probably thinking about business. You don't want to compete against an Amish person, you know, cause they probably outthought you, so it's fascinating.

Chris Powers: I'll go through a series of dumb questions, but their businesses are selling through to the general population of America. They're not just selling with any.

Ian Cassel: Correct. And it is mainly hands-on trades, construction, furniture, gazebos, and building things like that.

But they also, one of the companies, I forget if it's Borneo, but it's a little bit of a grill that has gone national now like they are creators of that. They get into exciting things, too. It's not just all crafty things, you know? Some of them are national businesses, too.

Chris Powers: And even today, like with all of the media, internet, and social media, they've still managed to stay entirely out of it.

Ian Cassel: Yeah, they stay in their lane. When I was in my mid-twenties, I moved up to the Poconos, which is the northeastern portion of Pennsylvania, and this was when that was.

That was like 2005. And so to give you an idea and, you know, how the real estate market was kind of in that 2005, 2006 range, I think my trailing 12-month income was about 3, 000 and I got a 100 per cent loan to buy a home, but I think it was 100, 000 kind of end unit of an old textile warehouse that was completely gutted.

And so, I got a second mortgage to redo it because I had the income to support the two mortgages. So I had Amish from back in Lancaster, who was probably on a two- three-hour drive, come up and do the work, and pride did it. It took three Amish minutes combined to create 20 an hour.

And when they're younger, they're allowed to drive cars, so, you know, one of them had a pickup truck and could drive up, I forget precisely the term for it, but when they get older and have to, you know, no more cars, grow a beard. 

Chris Powers: Do they look at us as crazy? Like, are they even interested in our life? Are they, like, those people are nuts?

Ian Cassel: That's a good question. I don't know. You know, but they're kind, you know, it's like they're not too closed off where they're not going to say hi back when you say hi to them. 

Chris Powers: Okay, so you grow up in Lancaster. You put your first trailing three grand down on some real estate, but that's different from what you ended up doing.

Ian Cassel: No, no. 

Chris Powers: How did you get into the micro-cap?

Ian Cassel: That's a good question. So when I was, I was 43. So when I was a teenager in high school, that was the late nineties. That was the dot com bubble technology bubble when I was a sophomore in high school. My parents sat me down and said, we'd save you about 20,000 for your college education.

It is all you're getting. You decide where you want to go. You want to go to the private university up the street and blow that in a semester. You can go into debt for the rest. That's on you, or you can go to a local community college commute. It will likely last you the whole time. And, it's all right.

So they introduced me to their financial advisor, and I opened an account and put that 20,000 in there. And he started sending me some information on small-cap tech companies. And I ended up taking that 20,000 and putting it in three companies. It was like 96, and in that period of the market, a monkey could have thrown a dart at a newspaper and hit a winning stock.

It was tech, right? So, and that's what I was, a monkey throwing a dart at a newspaper, you know, and so it ended up, I ended up 5xing that by the time I graduated. So the 20 turned into 100 when I graduated, and I got bitten by the greed bug. And just like every day when that you don't deserve early on, you think it's a skill when it's like, yeah, and so I ended up just going to the local community college commuting, being able to pay for my tuition.

As I went, I got a job as an actual financial advisor down the street. It was a glorified secretary working there. And I wrote down the crash of that cycle, and that 100,000 turned into eight coming down the other end. And at the same time, I was a receptionist at this, you know, Edward Jones office that had 1000 customers, and there, you know, I was fielding calls from people in every emotional state.

And I was like, and up to that point, I even had conversations with him about me, him, like, good knighting some of the assets over to me and setting up my own, you know, Edward Jones office there. And that seemed like a good idea, but having gone through that trough and dealing with other people and their emotions.

You know, it's just like, you know, I don't want to deal with other people. It's hard enough to deal with your emotions, make decisions, and let other people, especially financial ones. So then, the companies I invested in that turned into microcaps were small caps that went down.

Chris Powers: How do you get into it? 

Ian Cassel: So I like to say I was baptized into the microphone as my portfolio troughed. And so that would have been, you know, 2021. I was, at that point, a sophomore in college, so I started looking at microcaps. I'm one of those people who, when I lose money on something, want to figure out what and why I lost money and figure it out.

And there are usually two types of people; 90 per cent of people probably run away from that situation. Don't they don't want to touch another small company in their life? And so I dig in a little bit harder. And X.M. satellite radio was a company. Back then, before it merged with Sirius, and now it's in every car that's sold, XM was the leader; although they didn't have many subscribers, they didn't have many OEM manufacturers signed up to use the technology, it was a story stock, it was a micro-cap, they launched, you know, three satellites up into space, had 2 billion of debt, no revenue, you know, so, and the stock was 40 per cent held short at the time, which means everybody was betting that it was going to go bankrupt or go down at the very least.

I was mesmerized by the story, so I saw the CEO presenting in New York City about a three-hour car trip right away. And I called the conference organizer. I told him I was Ian Castle from Castle Capital. I made that up, and they said, yeah, sure. Come on, come on up. So I ended up taking a bus from Lancaster to New York City, you know, put on the suit that I wore for my high school, you know, the senior photo still fit and put on too many lbs, you know, during my first year and made my way up there. And, long story longer, I ended up weaselling my way into a one-on-one meeting with the CEO of X.M. satellite radio, Hugh Panera. And I had a 10-minute conversation with him.

And, you know, as you can imagine, my eyes were as big as saucers, and he could have said anything. It was terrific. But I ended up leaving that conversation, Getting on the bus, taking that 8,000 I had left, and buying X.M. satellite radio at 1. 78 per share. Again, it was all luck, but they started signing OEM agreements.

It triggered a giant short squeeze in the equity, and the stock went from 1. 78 to 34 in 14 months. 

Chris Powers: Oh my god. So you're back. 

Ian Cassel: Yeah, so I'm back, you know. So what's interesting about that is how you start and make your early money dictates where you line up on the risk curve.

So, I didn't know what I was doing the first time I made money in the dot com bubble, but I made money crash. Then I made it again. I've always been more comfortable with risk concentration. It could be done because I've already done it. And so, the next ten years were me losing money, making it back, losing money, and learning that way.

But I also had a few mentors then. So, after that experience, I was in college. I wanted to devote myself to micro-cap investing. And what captivated me to the space was having that conversation with that CEO, the ability for a moron like me. To sit across the table from someone like you and have a conversation.

And I'd get some qualitative nuggets of information in that scenario. I couldn't do that with Steve Jobs or anybody else. And so, the qualitative aspect of micro-cap investing initially captivated me, too. And still, what draws me in today is that from there, most of the activity in these small micro-cap companies was on public message boards because they're mainly retail-owned. After all, they're so small and liquid that no institution owns them.

And so I gravitated to those boards and kind of learned the ropes of investing, found a couple of mentors on those boards that showed me how they invested, and, at the same time, devoted myself to just wanting to be a full-time private micro-cap investor quickly, humanly possible, and went suitable from undergrad into grad school because I got luckily I got into an assistantship that paid for the grad school. I needed a socially acceptable way to waste time to have this craft, and that was that. Then, after that, I did a couple of years of consulting from 2006 to 2007, and then, right in the depths of the GFC, the crisis cut the core of the consulting I was doing. I just became a full-time private microcap investor living off my balance sheet.

So anyway, it's a long story, and we're halfway through it, but we'll get the other half. 

Chris Powers: Yeah, there are a few things I want to pick on before we get there; one, real quick, a story stock; I'm assuming that has momentum because the story sounds perfect. It doesn't have the fundamentals.

Ian Cassel: Exactly. I would divide a story stock, which doesn't have any financials, fundamentals, or revenues. 

Chris Powers: You said that 90 per cent of people would have left Microcaps, but something about your decision to lean in and study why Microcaps lose money is how you put it. Yeah, I mean, what did you learn, I guess, is kind of the question or when you went back after it went from 100 to 8, I know you were still young and yeah, what you, but at that time, what did you think you learned?

   Ian Cassel: Well, I was mainly in the mindset of losing this so quickly, but I knew I could make it back just as soon because I did make money in the small-cap, you know, bull market. I was looking for; I don't want to say double down on something that probably lost me money in the past, but, you know, I was trying to, I was just pissed off, you know, I was just like, I know I'm better than this, you know, and I'm I was staring at micro casts in my portfolio. Then I was looking at other ones.

Let's figure this out. Cause I knew enough, I followed enough people where I learned that microcap investing was an interesting spot because it is a majority of public equities that exist. And most of the best-performing stocks ever started as microcaps, most of the best investors ever from Buffett to Lynch to Greenblatt, they all formed a microcap, you know, and it's a space that, you know, probably all land in the United States supports about 2.5 million jobs. So it's essential to the economy, although that's roughly the same amount that Walmart has, but as a whole, it's a tiny space. So, there are 10,000 public companies in North America, giving or taking about 50 per cent of microcaps. These are small companies that most people have never heard of before, and that's the opportunity. 

Chris Powers: And most of those tiny caps because they were once big caps, large caps or most of them small caps because they choose to go public at a very early stage of their lives.

Ian Cassel: 20 years ago, it would have been more geared toward more small companies going public today. They're here specifically in the U.S. Fewer small companies are going public, so the companies today are mainly fallen angels, or they've always been small on, you know, they would always be small.

Chris Powers: And is there a misnomer or misinterpretation? When I think of a tiny business, I remember talking at Main Street. We'll get into it in a bit. But you said some of these companies are like five or 10 million of enterprise value in their public. Is that right?

Ian Cassel: No, that's exactly right. 

Chris Powers: I immediately go, well, the cost to run a company, like the cost to be public, is so high.

How could you be public at that size? And I remember you saying it's less expensive than some think.

Ian Cassel: Yeah, it's one of the reasons. I was excited about the presentation out there at the Main Street Summit. If you're in a room of even financially astute professionals, and if you were to ask everybody in that room, how much does it cost to be public?

Most say somewhere between 2 and 5 million per year of additional costs on top of your private cost structure. And that in itself is enough of a headwind, you know, people believe that nobody wants to go public, but it's a lot less than that. I asked a few of my portfolio companies that, and these are sub-hundred million market cap companies, you know what they pay, and the honest answer is.

Around three to 500 000 a year, and it's not insignificant, but it's not 5 000 000. You know, and you can spend just like everything. You can buy a Ferrari. You can buy a Toyota. You can spend as much as you want, but there's a giant. An interesting statistic I use is when you look at public equities, 87 per cent of all public equities globally went up 1000 or more over the last ten years.

That's a mouthful; 87 per cent of public equities went up 10x or more over the last ten years, originated out of microcap, and 82 per cent are profitable. And so, if you want to find the following multi-bagger stock, you should look at something small, growing and thriving. And a lot of them don't look like Google.

They're not going ever to be that big. If you look at that average multi-bagger, it's a small business that can grow from 10 million to 30 million in revenue and not dilute and grow earnings. And that's a ten-bagger. That's not, and those are out there.

And so that's what I'm trying to find as a microcap investor is trying to find them earlier. The earlier, the better. 

Chris Powers: Why do you think Buffett Greenblatt and some of those guys started microcap? Is that because they genuinely felt like that's where the most returns were, or did they feel that with the amount of money they were playing with at the time, that made the most sense?

Ian Cassel: It's a combination of all those things. If you're comparing kinds of things, there are three ways to own a small business. You have venture capital, private equity, and small private equity, like Brent B Shore. And then you have a small micro-cap. You have institutional inflows mainly taking over those first two buckets.

It's like the Andreessen Horowitz's or whatever V.C.; they're getting the best deals on the P side. You're seeing a lot of kinds of middle markets, like private equity, trying to go after those companies on the personal side. It's pretty standardized and becoming more so here in microcap.

It's the constraint of illiquidity that keeps out any institutionalization. It's the only one with a pure structural advantage to the smaller investor because, as we all know, it's a. It's a benefit to mark your book to whatever you want when you own a company, a majority of a private company, or whatever the case may be; institutional capital doesn't like when a 500 trade can influence up or down 20 per cent inequity. You know, explain that they're so illiquid. For example, somebody decides to buy 500 with a stock, and suddenly, the stock goes up 10%. Oh yeah. You know, versus down 10%, that ruins your performance incentive for your private equity firm at the end of the year.

You know, they don't like that, you know? That structural advantage to the small astute investor has been in place for decades and will likely remain. And Buffett saw that Greenblatt saw that, and that's why they don't invest it anymore: you get so big with your assets, grow out of the space, and go upstream to small cap and maybe cap just like they did.

Chris Powers: So you've had to consciously decide to stay within relative size to remain in the micro-cap space. You can't have a 20-billion or two-billion-dollar fund and be in this space.

Ian Cassel: You can. Usually, people were like, how do I get exposure to micro-cap? You get it through two or three indices, but they own 1700 microcaps.

Seventy per cent of them are unprofitable, and you own some of the more considerable open-ended funds that are 500 million assets. But again, you're holding a big bunch of companies. And in micro-cap, more so than any other asset class, the worst way to get exposure to this asset class is to own all of them.

It's a stock pickers market more than any other market cap class. 

Chris Powers: When you said 70 per cent aren't making money, is that usually because they're at such an early stage that they're just not there yet? Or is it just because they're on the downside of a wrong string of business?

Ian Cassel: No, companies generally go public to raise money. You know, and the irony of that is the best-performing ones are the ones that don't need to raise money. And that's the overall. The actual math is that 85 per cent of microcaps need to be more reputable. And so when people ask about wanting to get into the space, I said, focus on the 15 per cent real businesses. And that cuts out 90 per cent of the heartache. 

Chris Powers: All right, let's go back to 08. So now you're, I'm doing this whole time. Then what started to happen?

Ian Cassel: Well, 08 was. In 07, I was thinking about becoming a full-time private investor, and I was. I didn't know I would be tested right around the corner, but I was waiting.

I wanted to be tested in an environment. I didn't know that environment was coming, but I learned valuable lessons from that experience. And I've always been a concentrated investor. Back then, I was in three or four companies. I would know him better than anyone else, have my pulse in the business the best I could have frequent conversations with management, which I still do today, and know what I own.

And then, one of the companies I invested in was in July of 2008; I travelled to Salt Lake City and met with a company called Z. A. G. G. They were putting a plastic film. They were the first ones. To arrange a plastic film as a screen protector on an iPhone because that was like the second generation iPhone 3G just came out, and they were a peripheral type of player in that, and it became like an Apple Play over time.

But back then, it was a 5 million revenue company that was, or maybe five or 10 million in revenue company that was breaking even entirely out there, met with a management team, ended up buying a position at 65, 70 cents. They just started crushing it because they were getting and starting a distribution at Best Buy, like brick and mortar.

They also had kiosks and malls and things like that. And even during that environment, through the second half of 08 into early 09, they doubled the size of their business. They started earning more money. They didn't need to dilute. And even in that environment, when the S and P draw down 52%, that stock went up 280%.

Even in that environment, it was still becoming institutionalized on the buy side, which was interesting. It was one of those things that crystallized my investment philosophy of I want to find these tiny ones because they aren't institutionalized yet, which means during bear markets, the redemption cycles like they're not getting bid, whacked by institutions and indices selling out because it's risk-off like they're not owned by anybody, you know, and in fact.

On the institutional side, institutions are always attracted to fast-growing, profitable, unique businesses that they don't own, even in a drawdown like 2008. And so that crystallized my investment philosophy from that point forward about what I want to find, you know, those situations. So that's my best defence in a bad and promising market.

And so that wasn't the initial question, but I ended up going full-time. It was around the trough in early 2009. And I had my blog for a while, discussing some ideas I liked. And that was the one kind of blogging that was still relatively new. And I had a big following through the blog.

And after a while, like every time I post on something, it would push the stock up or down depending on what I post. And it's great for your ego, but I wouldn't say I liked it. You know, the powers that be don't like that. You know, type of stock movement, because people don't want people to think it's like a pump or something like that.

It could be a better place. So I decided to shut my blog down because the last thing I posted on was like a New York stock exchange listed company, and it went up 300 per cent daily on about 500 million worth of volume. And it was just like, I'm like, all right, done tapped out, you know, shutting it down.

And so I shut down the blog, and I wanted to, but I enjoyed talking about ideas and stuff and talking to other people about their ideas. So I came up with the idea of a microcap club back then, and it was, okay, let's get all the smart people in this niche of investing in one place, an online community.

I cut my teeth on public message boards. It's like that, but the private community launched that in 2011. And, 13 years later, it's the best brand in the micro-cap in the world, and it's the best community in the world, and it's pretty cool.

It's an excellent spot and tiny, but we have the best stock pickers in our niche on the planet who are talking about what they like and why and discussing due diligence and collaborating and all that stuff. And it continues to be a great community. A big idea generator for me and the small fund that I manage, it continues to be probably the best networking tool on the planet in the micro-cap space to build a network with other investors and build out your relationships because, as you know, in your business, your most significant asset evolves from something analytical or some edge you might think you have to want to be relational down the road, you know, because it's all about, Whether it's real estate or micro-cap investing, your ability to get to the truth quicker than somebody else on a real estate investment that you're looking at or on a company that I'm looking to investBeingbeing able to broaden the relationship aspect is probably the number one thing for me—being able to get to people and form those relationships. 

Chris Powers: How did you start it? So you started calling your friends, and you're like, Hey, will you start posting here? Everybody that had been on your blog and engaged, you were trying to move onto this platform.

Ian Cassel: Yeah. Like, and just other investors I met on message boards I knew were good. Cause I want it to be like, just people that knew what they were doing, like experienced people. 

Chris Powers: Did you vet and vet the applicants before they could come on?

Ian Cassel: Yeah. Our application process evolved over the years, but it was mainly me talking to myself in the first three years.

Chris Powers: Well, that's what I was going to say, because a community of one, like if you're the second person in on a community, you're like, I'm going to join this and talk to Ian. So, those first three years. How many people did it take before you started having those network effects?

Ian Cassel: It's, it's, I wish I could say I have the secret sauce to it, but it continues to be a grind. Having a small, active, private community is difficult because of microcap investors in particular. We're such a unique, eclectic breed, you know, because half the people are small business owners, they own a business themselves, retail, intelligent retail investors, which are some of the best investors I know, by the way, because they know what small businesses and what it takes.

And then you have some institutional ones, too, but they are unique, like herding cats. How many people are on it? We have 250 members. And that's been consistent over ten years. 

Chris Powers: That's okay. So, going to 500 members would be just crazy.

Ian Cassel: Well, in the early years, I cared about what that number was.

Then, I realized I would rather have a very active small community than a less active large one. So, the way to get in is to submit an investment thesis on your favourite micro-cap stock. The membership itself votes on the quality level, yes or no vote. Oh, enough. And if you get a 70 per cent yes vote.

And if you don't, you don't. And so today, we have 20 monthly applications for about four people to get in. We should prune out about four people who become inactive because we have some activity rules to keep a member, which I found out you need the carrot. Still, it would help if you also had the stick, or it doesn't mean anything to people.

So we prune out people. So it's always been like 250. And what happens over time is that it just becomes a better and better small private community. And it's just taking time to get it. It's like putting back a tree. 

Chris Powers: So what is a fantastic user doing every week, every month? If you said the perfect user on Micro Cap Club is doing X, what are they doing?

Ian Cassel: Since most of the forum itself, a thousand companies have been profiled in the club since its inception. So, continuing to profile new ideas and keeping the ideas they profiled and talked about originated before up to date, the latest Ernie's report, news material events.

Also, engaging people on other people's ideas and not in a rah, rah, let's go, bull being critical. A combination of those things makes the best members. And it is challenging because we have a bunch of members that might only be on there because of the one company they follow that they like, and they're going to refrain from engaging with somebody else and somebody else.

So you're constantly bumping up against that, but we've had, we've done pretty good. And so we have 250 members and then. We launched it in 2011. 2016. I was sick of spending 40 grand a year myself, keeping this website looking professional and more significant than what it was.

How do we monetize this? That doesn't destroy the ethos of what we have. So, I was layered on a subscriber component, running into many fund managers and brokers. People have compliance departments that couldn't participate on a message board, but they could pay to get just view-only access to the forum.

And so we launched a subscriber or subscription like I was in 2016. And now we have several 100 subscribers worldwide who pay to get view-only access to the conversations we're having internally in that forum. And a lot of them are institutional. 

Chris Powers: You can see who's looking in on any idea or topic being?

Ian Cassel: You can't see who it is, but they can engage.

Chris Powers: Yeah. We're back to investing, but how critical do you think building that private community has just been to your career? Like we met on Twitter, it's one of the largest communities in the world, and there's a ton of value there. But some of the most advantageous real estate ideas I have happened in a 12-person WhatsApp group I'm in. How would you rank that microcap club in the evolution of your success in microcap investing?

Ian Cassel: Well, for me, it's been huge. The idea has been interesting over the last five years; it's become increasingly global. Five years ago, 90% of our membership and audience were Canadian investors, us, and Canadian stocks.

Now it's like 50%, probably 20 per cent European, right? 12 per cent Australian, those types of things. So, it's getting increasingly global, and I've become more of a worldwide investor over the years. It helped me transition to seeing the idea flow and intelligent people talking about stocks in Germany, Australia, or places like that.

So, for me, it's been huge. And it's a tremendous top-of-funnel idea generator for other people in the same way. And I still have, like you said, your 12 per cent WhatsApp group. You still have that core group of people that you talk to that I spoke to, on a widespread basis, that you still have on the side that you're still doing that.

But this is a great way to continue building, build that up, and create new friends and colleagues. 

Chris Powers: Let's discuss your process; you said thousands of these companies are out there. The micro-cap club is throwing out ideas. You're concentrated.

How many companies do you own today?

Ian Cassel: About 10. 

Chris Powers: Okay. So you've picked 10 of them. How do you go from up here to down here?

Ian Cassel: Yeah. And it's a good question. I may take one step back with micro-cap investing. You have the same flavours of investing in a large cap. They're just smaller businesses; it's like somebody coming to you and asking you and telling you they're a real estate investor. You're just like, what does that mean? Like are you multifamily or industrial? You know what? What does that mean? It's the same thing with microcaps. So it's always essential to have the person.

Describe what their flavour of investing is. So you can drill down into that. And, you find a lot of value, profound value growth. And you have people that focus on mining or oil and gas or focus or this, or that you have Nishi, all those same elements are down here in my hair cap, which makes it cool too.

So, getting to my flavour of investing at a top level, I'm looking for really scarce businesses that happen to be public. So, it's one of one business or one of two that are publicly traded. So, I'm a big fan of scarcity, especially if it's a small, growing, double-digit profitable business.

Institutions will likely come for that equity at some point, just like people come for a Picasso once a year, pay up the same type of dynamic and look for ones with a good balance sheet to endure a recession. They can be aggressive when their competitors aren't, and I co-authored two books on intelligent fanaticism and wrote them in 2016 and 2017. with my co-author, and it was a three-year project; if you want to find great companies early, you have to find great leaders early.

And so we went back and looked at a whole bunch of leaders that would be similar to that book that you're looking at right there, people that build up a small company into a large one and then dominated their niche, geography, or industry over decades. Like, how did they do that? So that's what those two books are about, and fine-tune my lens for finding those types of intelligent fanatic leaders in small micro-cap companies.

That's where the term for my small fund, intelligent fanatics, and capital management came from. So intelligent fanatics is a term that Charlie Munger initially used in one of his speeches. And he mentions a couple of these folks.

And so our first book takes the folks he mentioned in his speeches and tearing apart their backgrounds. I like how they built their businesses and pointed out lessons from it. Then, we use that as a blueprint to find others in the public sphere and private companies.

And then retell it again. So I'm also trying to find this kind of intelligent, fanatic leader in these small companies. And then, obviously, there's an evaluation metric. Based on fundamentals, not a story, can we fundamentally double our money in three years or 25 per cent net kager on the investment side?

And that is where I've evolved even more. So, the microcap club has come into play over the last five years. For me and my flavour of investing, I'm getting closer to wanting to partner with the investments I invest in. And so, very similar to venture capital or private equity, they become a partner and want to help the company grow because of the knowledge they've gained of the reps they put in doing that.

And that's our edge. That's an important question to ask any fund manager. Like, what's your edge? You shouldn't invest with them if they can't answer it. Yeah, it's like, My edge is my reputation. And yeah, it's the 20 years in microcap club and intelligent fanatics.

But when I see a tiny, good business with a great leader, they still need more capital markets experience, and they've usually been given bad advice from an investment bank or whoever took on the public. And if I can fill that gap and become sort of a trusted kind of invisible advisor to them to make sure they don't screw up.

 That's where I can be an asset and impact a positive outcome for them and my investment. And so, I take a partnership model of trying to find something small. And that could mean even a direct investment. I'm talking about a small direct investor. We're talking about tens of millions.

I'm talking about, like, literally, a 500,000 check. Let me buy 4 per cent of the company, or a million or whatever it is. And then let's be partners and try to grow this. And it's a, almost, I don't want to say a better way of doing it, but in V.C. or P.E., it's like they're listening to you because you own a majority of the business or a preferred share class. You're they're forced to listen to you with me. I own three. I'm staying below 5 per cent because that's when you must file with the S. E. C. It's like showing your hand.

Yeah, I want to stay under the radar a little bit with our investments, so it's like usually at 4. 9, I'll stop, and so they don't have to listen to me, and so you go into it where they trust you, you trust them, and that's where it's. You can make a lot of money and feel like you're doing more than just buying low and selling high in transactional typesetting, like most stock investing is. 

Chris Powers: Do you start setting that relationship before buying the first share? 

Ian Cassel: Yes. 

Chris Powers: That's why you're buying into it. Or do you get to 4. 9 and say, Hey, here I am. 

Ian Cassel: No, it's just like how any great relationship grows, start small, and you build trust through reciprocation and seeing them and how they react in different scenarios and good times, bad times when they're crying when they're angry, and seeing what type of person they are and that's how you build trust.

And that's how it is with these small companies, too, and unfortunately, time is an excellent hurdle with these companies, too, because it's what you get in most small companies. I found that you will like them, the business, and the situation less the longer you own them. It's the rare ones. You want them more.

Yeah, just like in every relationship in life. It's the same way with these. We have one of our newer investments we put on. And this gets into the process of how we find things. Usually, what triggers us to look at something is insider buying or a new management team putting skin in the game triggers.

Usually, what that looks like is an old situation for business. A new management team comes in, injects 5 million of capital, redoes the strategy and something new becomes something old. And we want to find that transformation stage right at the point of that investment. That's what triggers our interest.

And it's when you look at who's getting, new people are getting involved, and you see 1, 2, 3, 4 people that have built companies from zero to 100 million or a billion. And you're like, what are these? People are doing with a small, obscure 15-cent company, and that's enough to. Let's get on the phone or get on a plane and meet them.

And we see that ten times a year. And perhaps 2 of them are actionable. And often, if you decided to do this in a small public company, you would be a perfect example. What's Chris doing with this 10 million market cap thing? He's not doing it to lose money.

And why is he bringing his buddies involved in this? Well, he's not bringing them in to lose money. So, it's commonly sensible, but it's what triggers me to look. And so we had, as an example, one investment. I won't name the name because there's no point to it, but there's.

That type of event happened. It was like March last year; we had two or three conversations with the management. The patriarch of a family office took over a small public company and brought in some of his legacy assets and his family office—still, several million dollars. At the same time, he brought some of his buddies who have been successful onto the board and things like that. He travelled out to meet with them in June but didn't buy any stock.

We saw them turn profitable. We saw them doing a creative acquisition in September. We finally made a small investment in December of this year. So that was nine months later, and we got lucky because even though there was lots of fundamental progress, the stock didn't budge. During this time, we gave them advice.

It would help if you did this, this, this, this, and they listened. And so they were listening to us. So it was, it was an easy decision and easy check to write. 

Chris Powers: the loaded question is, what advice did you give them? I would tie it to what you said: many of these public companies on the capital market side have been given bad advice.

You could share some advice you gave them. But what is terrible advice like in this world? 

Ian Cassel: Usually, it has to do with, they're told to do some stock promotion, paying people to promote the stock, either through social media or whatever, it's number one, number two.

Even the way they raise funds sometimes, even though they're the main ones putting money in, that's just structured weirdly. Like, you don't like, it'll be like they're putting money in. Let's say at 1, then they'll include a whole warrant at 1. 50 just because one guy said they should. It's like, well, now your cap structure is messed up. Like, you didn't have to do that. It's just like they don't know any better. And like this last one, just like the name of the company was just, I was, I was just like, and they got, I was like, you got to change this name to this.

And they changed the name to that. Like they were listening, like that didn't happen in one conversation, but over months, it was like this, that name doesn't reflect who you are, where you're going, like change it to something that does, also about doing reverse stock splits and eventually uplifting to the NASDAQ.

Like they didn't think as much about that, it was so, getting them. What happened to get the board composition in line to where they can potentially do another year, do a reverse stock split and then uplist onto the NASDAQ? 

Chris Powers: That makes their share price just more significant enough to.

 Ian Cassel: Yeah, exactly. It doesn't mean anything with the valuation. It just means fewer shares outstanding. 

Chris Powers: If I was a micro-cap CEO, and you called me for our first meeting, it'd be due diligence or discovery. What are you usually trying to get out of those first call-first meetings? Do you have a situation dependent on where the company is?

Or is there something you're looking for or a few things you want to get out of our first hour together? And is it one hour, or do you usually get a whole afternoon with folks?

Ian Cassel: It's usually a whole day. For example, when we went out to this company in particular, it was a full day.

It meant me and them, a couple of the board members, and people who worked there. 

Chris Powers: And real quick, I'm assuming you got a partial day when you first started. They said it was Ian, but he wants a full day with our CEO. 

Ian Cassel: I cut my teeth into the qualitative side of investing when I first mentored, and I just wrote a blog post called Mentors on Microcap club com where I talk about it.

But I met him on a message board and. He was one of these; he trained brokers back in the day, worked, and had his firm in the seventies and eighties, and he was cut from that cloth of like type a personality, like now everybody's like symbiotic like we can all make money together.

That wasn't; it's the Michael Steinhardt era. It's like, no, like I'm right. You're mistaken. That type of error is one that I have an affinity for. Like, I still like that part of me. It's cool. Yeah, you want to win. Yeah, yeah, exactly. So that's how he was, but he was very.

He would get an A plus in a how-to-win Friends and Influence People department. You come into a room in a baritone voice. You can hear him from across the room; he is likeable within 2 seconds. And so he was the one that when I was in college, I would skip out on classes and head down to where I only missed 1 class, but I would travel around the country and visit companies with him.

And figuratively, I would hold his umbrella as he walked, but he would let me there. He showed me how he communicated, like learning soft skills, which is just how to be likeable because people will tell you more if they like you, and he had that down.

And so, yeah, he told me many other things, too. He was also a very concentrated investor. I want to remember what your first question was. 

Chris Powers: My first question was if you would visit me so it would be a day. What are you trying to leave with? On day one, and maybe it's again, different situations require different results, but that's a big day to spend with somebody. There's you have an agenda.

Ian Cassel: Yeah, usually overall, the general feel what I'm trying to do is figure out what their intentions are because, in most of these situations, I'm invested in. They're competent people with a net worth. And so, are you using this public and as a way to get rid of the garbage in your family office, spinning out?

Hopefully, somebody else buys it, or is this like, what are your intentions to build this? Like you did three other things in your past career, see their pure intentions and how they intend to do it. Also, I found early in my career that I would focus a lot on the CEO and the founder; I would need more time for the people around me, so the difference now is I want to spend some time with the lieutenants there.

 Also, talk to a couple of employees because the way you gauge culture isn't by talking to the person at the top; it's the person at the bottom and see why they're there and if they would move across the street for a dollar an hour or more, and so you want to talk to get a natural feel for, for everything.

Chris Powers: What are the not-so-obvious red flags? 

Ian Cassel: It's difficult because they're now, I can usually see red flags, and it's just like, it's a pass. It doesn't get to a conversation, but you still see a lot of related party transactions. Just weird things with real estate or something like that, where they're just they're padding their pockets three different ways in that public entity, so a lot of it's that I don't think overall, there's as much outright fraud is what most people would like to say there is in the microcap ecosystem.

There's certainly a decent amount of failure. But then again, it was; it's less than any other small business ecosystem, whether it's private or in venture capital; the failure rates are less than a micro cab; it's just that these companies happen to be public.

So we get a black eye because these are public ones going bankrupt. Many red flags are commonsensical, and you alleviate many of them by seeing how the business has progressed. And if it's just a growing profitable business and reading through the filings,

If they do earnings calls or have transcripts or they've done interviews, for their college institution, they gave 10 million to, just seeing how they talk about themselves and other people and how other people talk about them. 

Chris Powers: So you'll set up a whole day. I've never done one of these.

So I'm just curious. So I'm interested, and I'm coming. Will people outline the agenda for who you'll talk to throughout the day, or will you please tell me what I'd like to accomplish? You all tell me how I can get this done.

Ian Cassel: For the first trip. I usually let them lead it.

Chris Powers: Yeah. Can you send a list of questions in? 

Ian Cassel: No.

Chris Powers: You say I'm coming. 

Ian Cassel: Yeah, I'll be okay if I come and visit. 

Chris Powers: It's like that, Dion Sanders. When he first got to Colorado and his first team talk, he kept telling him I'm coming 

Ian Cassel: And he was still coaching at Florida Atlantic.

Chris Powers: But you'll spend all day getting your questions answered.

You're figuring out leadership; you're figuring out the incentives and their intent. 

Ian Cassel: Yeah. 

Chris Powers: What else is going into this? What other due diligence is happening for you to get to a decision? 

Ian Cassel: Yeah. A lot of times, the fundamentals do. There's a lot of due diligence for him. For example, if a company is increasing and it's profitable, and they're taking share, we or do the usual kind of scuttlebutt work that ordinary people would do. 

Yeah. But we let the business fundamentals lead a lot of that. Yeah. Sometimes, these businesses are growing because of many things, and you need help pinpointing exactly why you have broad brush strokes. That's an excellent point to bring up. I still need to correct quite a bit. But this is not something I'm trying to do. To play for perfection, it's like this: I'm hoping to be right 60 per cent of the time; I'm going to be wrong quite a bit, and being wrong doesn't mean you lose money. It just means it didn't turn out to be what you thought it could be. You might still make money. It's just that you held it for a year, and there's a small business. They emerged in good ways and wrong ways. 

Chris Powers: Some people asked about that. I'll skip there for just a second. But when you buy something, do you expect movement in the first 12 months or two years? Some of the questions that came in were: how long, how have you dealt with things where it's almost like, you're right, but the stock has stayed the same for years?

Ian Cassel: Yeah. I'm okay with the stock staying the same as the fundamentals improve. And it's essential. It's easy to say hard to do, but disconnect that stock price from the fundamentals and pay attention to the fundamentals of the business, and that's the key where, where I've gotten nailed, other people have to, is just letting the stock price dictate your conviction, just because the stock's down, the business is terrible, just because the stock's way up, the company is excellent. It would help if you had a regular pulse on that business. And there's enough in the financial documents they report quarterly to tell you that.

But as long as the fundamentals are improving, I'm okay holding. 

Chris Powers: As a partner, do you tell the leadership team I will start buying, or do you usually?

Ian Cassel: Not necessarily. They usually know, though. I mean, some of these companies, I mean, they trade, it depends. The tricky part about this is when you say micro-cap, too, there's a 200 million market cap, which is entirely different from a 20 million market cap.

So a 20 million market cap might be a 10 million revenue company breaking even. A 200-million market cap is a company earning 10 million in earnings. And as a business owner, there's a. those are two different beasts. That's apples and oranges. It's like hustle-scaled, and we have both in our portfolios. We're often betting on these hustles that can scale, and that's the beauty of micro-cap spaces. I don't need to find the next Google. I need to find the following small business that can grow, not dilute me, and earn more money.

And that's predominantly, and a lot of times I don't know how big it can be when I initially invest in it, because a lot of these massive winners, even like spell down in San Antonio, which, it's talked about a lot about on micro-cap club and on social media, which has been like a 2000 bagger, Expel.

Chris Powers: It's the number one stock. 

Ian Cassel: Yeah, yeah, yeah. But even that one, like I, I visited that company in 2013 at 42 cents per share and sat across the table from Ryan Pape. That would have been a 10 million market cap. It was a 15 million run rate company, earning a million. And so what they do is they sell paint protection film.

So they put that on the whole car, the front of the card protected from rock chips. And I mean, it's 2000 bucks. So how many rich people are out there where they're going to spend 2000 and put on the front of their car, and you can't do it yourself? You have to get a dealer to do it with high friction experience.

Like, how's this ever going to scale? It Went from 45 cents to 100 per share over eight years, something like that. And so some of these things Get back to first principles. Just find something small that's growing. That's profitable. It's not diluting. So during that 2000 bagger experience, that expels was 2000 X 7 per cent dilution, seven, that's not much.

And that's the key: They grew the company from 15 million to 400 million in sales and from 500 000 in earnings to 50 million. Without diluting that easy and that hard, easy peasy. 

Chris Powers: On the non-dilutive part, as long as they're growing and profitable, they should have no reason to keep raising capital to dilute you. 

Ian Cassel: Yeah, I mean, and obviously, there's going to be moments where they maybe it's an acquisition or whatever it is, but as long as it's.

As long as your earnings are going up faster than your dilution, your earnings per share are increasing, and that's the other tricky thing that I find in micro-cap, especially since few people know how to raise capital effectively and even fewer people know how to structure an acquisition. So that's where it gets tricky for these smaller companies.

Chris Powers: And so you'll tell these small companies, Hey, if you're going through this, I would like to be that partner that helps you think through how to do this.

Ian Cassel: A hundred per cent. Yeah.

Chris Powers: All right. Fundamentals, obviously management on site. Is there any other due diligence you do before you get a conviction?

Ian Cassel: Yeah. What we try to do is there are one or two legacy shareholders that have been in there too long or have been there forever and know where all the skeletons are buried. So we reach out to people who have been in the sack for a while because usually, if they've been in it for a while, they're past the infatuation page.

Stage of just trying to get you to buy the stock. They're pretty honest, so that's one of those little nuggets. It's quite apparent, but only some people do. It's just reaching out to shareholders who have been in for a long time. I was talking to him. 

Chris Powers: They don't have to talk to you. They probably don't want to talk to you.

Ian Cassel: Yeah, they don't have to. And usually by that point in time, they're not, they don't necessarily, they've been in for so long. They don't care about it. It's a short-term move from me buying it or whatever they're in for longer-term reasons. 

Chris Powers: Are they usually the same actors in many of these companies or all across the board?

Ian Cassel: It can be all across the board. I mean, you see, it's crazy. One of the situations in which we own a small position is, and as another example, the CEO today, ten years prior, got involved when it was a pump and dump. He was a shareholder who took part in a private placement directly.

And he didn't know it was a pump and dump. He only realized that two years after that, he got pissed, did a proxy vote, kicked out the management team, business was burning money. And this is a guy that owns a construction business in Iowa. It's just an entrepreneur, a regular guy, who backstops it with a 2 million personal line of credit to keep the business going; 5 or 6 years later, Phoenix is rising back out; it's a tiny little business.

But it was probably doing 3 million in sales when he was in it, losing a million. And, last year, he provided them credit when they needed it. He put more money in. He owns about 40 per cent of this little business that just did 8 million in revenue and earned two, which is alright, and hopefully, they can keep growing like that.

Chris Powers: And it was a public company? That was a public company.

Ian Cassel: Yeah. Yeah. No, you'd be surprised. Most people would be surprised. Like I often say, in micro capital businesses I'm looking for, they probably wouldn't even be the biggest company in your small town, and yes, they should be private, but some of them should.

Many can make excellent returns for shareholders, even if it's an above-average business that can allocate capital relatively well. You can auto-zone this, too. His own was the one that just bought back stock, and it was an okay business but ended up being a massive winner.

You can see those same dynamics occur in small public companies as well. 

Chris Powers: You've been describing this, but your lightning-in-a-bottle concept finds companies that are small, profitable, and non-dilutive.

Ian Cassel: Yes. 

Chris Powers: Once in a company, due diligence continues. You talk a lot about continuous D.D. How rigorous are you on these companies once you're in them? Are you looking at them every day? Every week? What are you looking at?

Ian Cassel: I'm pretty high touch—probably more elevated than most. Mainly because we own them; they usually reach out to me as much as I reach out to them.

Chris Powers: And they're reaching out to you to say what?

Ian Cassel: Get to get my advice on things, which is what I like. Last Friday, she just wrote her annual letter for our fund. I said, to give people an example, like last Friday, four of the CEOs called me and asked me for advice for random capital markets questions, and that's good.

I want that; it's a lot of maintenance and due diligence because it's easy to get into these positions, sometimes more challenging to get back out of them because they are a liquid. So, constantly being aware of what you own may give you another helpful titbit. The age-old time, a holding period for our investments, is one or two years on average.

I wish it were forever. But it just shows how hard it is. If you were to ask me how many investments I still own today that you held five years ago, I would have fit in one way, shape, or form, say, 50 companies over the last five years. I still own three or four; it's hard. 

Chris Powers: And you've stayed in them all the time that wasn't getting out and then buying back in. 

Ian Cassel: Yeah, but there's another 47 I sold, right? So, this is not a coffee. You can put it under your mattress and forget it approach because these are small emerging businesses, and most of the time, they will evolve in the wrong ways or negative ways, or a competitor will impact them or whatever the case may be. And you need to be aware of the pulse of that business.

Chris Powers: Okay, but so the ongoing due diligence that you're doing, what's triggering the sale at two years? You're 25 percent Kager. 

Ian Cassel: It can be triggered for a lot of reasons. Usually, it's a change in the business dynamics. I didn't foresee coming, or it's a loss of trust with the management team. They did something that.

They shouldn't have good situations to sell, or we all want more when things go up too high or fast. We all want more. What's the breakdown between short-term and long-term capital gains for some investors? Short-term capital gains are a good thing. Something went up too far, too fast. 

Chris Powers: Is there a metric that if it's hit this, we're out quick, or it's just.

Ian Cassel: Normally, when it comes to, I wouldn't say, a normal, but a situation where the business is progressing, executing, and the stock goes up. Usually, if it's at a point where we're pulling forward, the next depends on the situation, but the next three to five years' worth of returns today.

That's when I'll start to exit. An example would be a company where we get in, and it's at 12 times earnings. And one year later, it's at 70 times earnings. Well, 12 times earnings, only a little is baked into that valuation at 70 times earnings. It's priced for perfection. And in 90 per cent of the cases, they will stub their toe on an upcoming quarter, and the stock will get cut in half.

So that's why you take some time off in those situations, and 99 per cent of the time, you're right to do so. 

Chris Powers: And once you're pulling the trigger, are you sizing into it, or are you trying to get as much of it as you can right out of the gate?

Ian Cassel: Usually, I have an intrinsic value of what I'm willing to pay up. Usually, when I'm getting involved with something, they're. I'm generally ready to buy the equity 25 per cent higher. If I'm a bid buyer, the idea probably needs to improve. I'm sitting below the bid, waiting for it to get hit. So that's what I usually do.

So I'm willing to move the market up to get a position because, like I said, someone trades 30 to 50 $ 000 worth a day. That's a, so you can do the math if you're trying to get a million-dollar position. And some trade less than that. 

Chris Powers: And who are you usually buying from legacy owners, or are there people trading?

Ian Cassel: People are trading it; you'd be surprised. There are tons of people just trying to sell these things. 

Chris Powers: But if you're trading 30 to 50,000 daily, the other counterparty is probably some retail investor. 

Ian Cassel: Yeah. And so these things are a liquid, but it's like the law of gravity with these small companies.

If the business excels, The earnings power goes up. The stock goes up. Liquidity always increases. So liquidity always increases with price, so that stock at 50 cents, trading $50,000 worth a day. At a dollar, we'll trade 200,000 at $3; we'll trade half a million dollars worth a day. So, again, I don't overthink liquidity; it's just. Am I right or not?

Chris Powers: You said I'm not interested in buying something that is undervalued that will always be undervalued. I want to find something undervalued that will get overvalued. How do you know if this is underestimated or their line of sight is just? Even though it's good, it's probably going to stay undervalued. 

Ian Cassel: What I mean by that is I'm not the usual kind of value or deep value mindset of just trying to find something that's trading less than the intrinsic value. I generally find unique businesses that are public and have a small ticker symbol that is growing to double digits and is profitable.

And honestly, it's just as simple as that. If you can find a unique business, especially, I mean, extra points, if it's in kind of a consumer tailwind or something like that, where it's something that people can see on a shelf that you can buy in from a consumer or retail investor later, because they went and bought it for their wife or whatever it is, like extra points for that. But it's what it looks like. 

Chris Powers: All right. I want to finish the emotional discussion as a real estate guy. It's like you buy the building. Only price it a few times a week. I can't price it every week, even in the environment we're in right now, where interest rates are up, everything's stalled.

Values are down, but I don't know how much I don't have to think about it. Man, I can buy a few shares of the stock. Or, God forbid, I purchased some Bitcoin on Coin base, and you're just staring at that thing every day. Have you learned to manage emotions? 

Ian Cassel: It gets back to disconnecting from the stock, but I say that kind of tongue in cheek just because I often watch stocks.

I do like I'm what's your setup. It's cool to say, and everybody says, " Hey, I turn off my computer during the day or a check for stock prices once a week, " that's great. And I'm checking stocks a hundred times daily because I've got the screens up now. I only have one screen.

It's just like a lot of stuff. We're buying something like things can happen in a hurry, like liquidity suddenly shows up like, Oh, no. So, there are 100,000 shares in the offer. And you have to be aware of it. And I got to take it, you know? And so it's just how I've always been to, like, I'm one of these. I'm a very long-term-oriented investor. I check stock prices frequently.

It doesn't hurt me because I gauge that business's intrinsic value well. And a lot of times, the moment to buy or sell can happen in an instant. Where somebody wakes up and says, what is in this piece? What is in the portfolio? Just sell it, and you have to be aware and be watching, and that's your chance to buy, or that's your chance to sell on the opposite side. 

Chris Powers: And when you're buying that, are you on fidelity or some platform, and you're just buying it right there or getting these things purchased the way you want? Are you dealing with brokers or well?

Ian Cassel: It was easier when I had a T.D. Ameritrade account. But now I have, like my prime, a small firm. So they execute the trades on it, and I can give them instructions. But I still have to be aware of a lot of this stuff.

Chris Powers: But you're checking every day, and it doesn't. You have no emotion, like if you have a stock you're in, and it capitulates.

Ian Cassel: No, I'd want to watch it because I would probably want to buy it if the business is doing well. I usually read an article about this coin, the art of catching falling knives. Still, usually, there's at least once or twice a year when I wake up. One of my positions is down 30 per cent pre-market for no reason other than just some person waking up on the wrong side of the bed and deciding to sell all their position at the market, and all those same emotions that everybody else goes through.

And it's funny when it happens to pre-market. Suddenly, you see bids go away because everybody's like, what's happened? Is there a lousy financing going on? Is the SEC doing the investigation? Everyone thinks the worst-case scenario is 90 per cent of the cases. Nothing's wrong, and that's where you can step into that gap and take advantage of an irrational stock price movement.

Chris Powers: Do you ever short anything, and why? 

Ian Cassel: No, it just doesn't fit my temperament. I don't know. Just wishing the worst happens doesn't work. I'm more positive. 

Chris Powers: Was that an acquired taste, or have you never shorted anything? 

Ian Cassel: I've never wanted to try. I'm dull, long, only trying, and acting differently than the letter I recently wrote to the partners.

I was just like, I'm not. I am a partner with the investments we're in. And many people may think of activism to get involved and force change. Like, I'm not that way. It's not my temperament either. More passive-aggressive, I'm not an activist. I'm more of just a multiplier.

I don't want, I don't want to get involved with bad things that can get worse. I'd instead find something suitable at value and be a multiplier, for that would be great. So you'll have to know where your temperament sits with everything and what type of investor you are. And that's just the investor I am.

Chris Powers: How do you think about where we're in today's market? It's at all-time highs. Everybody thought 23 was going to be just a terrible year. It ended up differently. Now, we're continuing to rally. Do you disconnect from where the market is, and you're just lasered in on those ten businesses?

Or do you take any macro-type thought into consideration when you're buying this stuff?

Ian Cassel: On the macro side, just being aware of the types of businesses you're in. When interest rates rise, it's a giant risk-off, so you see V.C. get nailed. When interest rates were rising, when you visited and saw it across the NASDAQ last year, the first half of last year, things just got bludgeoned.

But if you're in a business that doesn't need to raise capital or doesn't need to get capital, you can take advantage of that opportunity if it does sell off. And these businesses don't need money and shouldn't be affected. 

Chris Powers: Was the last ample buying opportunity for you that was like a market reaction to COVID-19?

Ian Cassel: No, 2020, I mean, that was.

Chris Powers: Was that a new set of experiences and learnings for you?

Ian Cassel: I've been through enough of those types of things. Maybe things. Maybe, well, even the GFC was worse than that. Several other ones could have been better; Covid was an odd circumstance because we had one company.

That at the low put out some news, and the stock 10 X.D. in a day. And like meme, I negated most of our loss that occurred during that drawdown, so it made us look better than we probably were, but it's. Also, it's part of it: a few eggs in the basket and what works during the bad times.

It's how you think about putting a portfolio together, too. It's like a view. It's like a stew where, individually, they look weird. Still, you put them together, and it tastes good because we have healthcare and gold mining companies in the portfolio.

We have different types of industries, such as education companies. 

Chris Powers: You're industry agnostic; it's more about finding the right people. Is there anything you won't touch industry-wise? 

Ian Cassel: pure. We have one in the portfolio, but. They are just pure story stocks. I do have one. Cause I can't help myself. We're all human stories. It's one where I've known the management for ten years, and no, I'm very well. 

Chris Powers: Are their management teams out there, and their whole thesis is, let's find an undervalued micro-cap stock and get into that?

Ian Cassel: Not so much.

Chris Powers: It's more we're in this business. It is what we like to do. It is public. We'll go take over that company. 

Ian Cassel: You see many fund managers or hedge fund managers that are activist types do that, like come in and force change because it's the same thing as if all the family business owners, you know, were publicly traded.

It's the same issue you see in small public companies where it's just that everybody from your country club on the board will say yes to whatever you speak, and that's also why there's more activism as a percentage. Seventy per cent of activism happens in microcaps because you can take easier control over these small businesses.

Chris Powers: Well, 10 million revenue business is like 30 40 50 maybe 60 70 employees at the most. Yeah, some are a lot smaller than that.

Ian Cassel: Oh, it is. It's funny sometimes when you're like, how is this thing, how is this thing? But, like, we just talked to one right before I came out here.

We had, it was like, a 4-cent stock with a 2 million market cap that did a million in earnings. It's something where the CEO was an old shareholder who came in, took over, and gave them 2 million with the loans. They're. They're in this niche market with a total addressable Tam of 50 million annually and the second largest player. There's. There's only one other player; it's just like, it's just the excellent conversation. It's like, wait a minute, this is like a 2 million mark-up, it's a, it's bizarre—things like how this happened. 

Chris Powers: Do you ever get side-tracked and want to get into the large cap or see an idea? No, you don't look at Apple.

Ian Cassel: No, I stay in my lane. Every time I've been doing this for 20 years and getting out of my lane, I get nailed, whether in real estate or even dabbling into private investments. Like I am, that's one area the uniqueness is good or bad, but I am only a microcap investor.

That's what I focus on: a hundred per cent of my net worth. Everything I focus on and our fund, there's no, I don't have Google alongside a 5 million market cap. It's just all pure.

Chris Powers: And there's a micro-cap end once it's at what size. 

Ian Cassel: That's a good question. That's how much the inflation rate is currently.

Historically, it's been like a 300 million USD market valuation. Now it's probably more like 500 million kind of USD. 

Chris Powers: And you've been going, and you said that you started in the USA only, but now you'll invest across. You are fine investing in other countries. 

Ian Cassel: I'm still more attuned to investing in the U.S., and 70 per cent of our portfolio is centred. Cause that's where our advantages are. And there's an advantage, too, because even though the U. S. is the most developed country in the world and probably has the best markets in the world, the OTC level of the tier of company, it's odd because there's perhaps no other place on the planet where you can have a publicly listed company that doesn't post any financials.

It doesn't post anything. It's like a ticker symbol that trades, and so you can, it's a lot, the most developed country. We have the most inefficient market in this regard. Yeah, it's exciting. And that's just because there's so many. 

Chris Powers: Well, you said something earlier.

You said that these family offices will take over and dump a bunch of assets there. 

Ian Cassel: We've seen that from time to time. 

Chris Powers: And what are they doing? They're just hoping they can make it a story stock, tell a good enough story to make it pretend like these aren't a bunch of dollars.

Ian Cassel: Yeah, it's like if you had bad real estate, let's put our F-grade real estate into this shell, but it's just a short-term game. , It might not be that vindictive, or they might think that there's a play there, a real one. Still, it's why when I sit down with people, especially if they had previous success multiple times, I try to figure out what their intentions are, what I want to hear and what I don't tell them is we want to do this again, this is my last hurrah, I'm 65, there's an opportunity here bringing the boys back together or gals and let's see if we can do another multi-bagger. That's what you want to hear. 

Chris Powers: Besides micro-cap club. What is the best source of information? Talking to people is great.

Is there other what? Things on the internet, things you read, like what's, what else is a good source of info?

Ian Cassel: It depends on what type of info you want. Twitter's a fantastic resource now. Everybody posts their ideas there, which is good. And it's built nicely into social media, too.

Microcap club, even though we're private, because many people also post on our forum. But it depends really on what you're looking for. There are so many different people with sub stacks with blogs now that just freely share what they're doing and why and what they like; there are so many other podcasts now where they are yet another value podcast it's another one where he's bringing on people with ideas and some of them are micro caps. You can get information in any different way. Now it's pretty, pretty wild. 

Chris Powers: And is there ever an idea that's great that you probably have an art? Are you constantly surprised in this market?

Ian Cassel: Yes, I am. It was like the old 1990s commercials about the internet. Like I reached the end of the internet, that commercial every day. It will be like, well, I've seen all of them. And then, all of a sudden, you stumble upon something. You're like, Whoa. And that happens a handful of times, and that's the exciting part.

Especially a person that's busy, just like you are, to where all of a sudden an opportunity or relationship or whatever stumbles on your desk like it was meant for you and, Angela, clear the schedule; it's just like I need to focus on this for a day. There's the best situation in your world often.

Chris Powers: Yeah, real estate is so much slower moving. But in your world, you're saying there are days when stocks are down 30, 40, or 50 per cent, and it's time to move.

Ian Cassel: Well, and primarily, yeah, in general, overall, microcap has performed poorly, very bad compared to the overall market. So overall, it's a great time to look at the space, let alone find the good ones in the mix.

Chris Powers: Yep. All right, Ian. 

Ian Cassel: Yeah. Thanks for having me on. 

Chris Powers: Thanks for coming. 

Ian Cassel: Thank you. Appreciate it.