Ian Cassel on MicroCapClub, the PlanetMicroCap acquisition and IntelligentCM | S08 E03
Summary
Micro-cap Market: Guest highlights a risk-on environment with micro caps outperforming recently, but warns of frothiness and late-cycle dynamics.
Resources/Commodities: Strong performance in gold, silver, copper, and critical minerals, with TSXV strength underscoring cyclicality and benchmark distortions.
AI Tailwinds: AI and data center-related plays are filtering into micro caps, producing notable winners within the community.
Going Public: Advocacy for more small, profitable companies to list publicly due to higher valuation multiples versus private markets and manageable compliance costs.
Execution Discipline: Emphasis on the “Art of Execution” framework—avoid paralysis on losers, cut or double with intent, and let winners run rather than taking quick 10–20% gains.
Position Sizing: Start smaller in micro caps and let positions earn size; major mistakes often stem from averaging down and oversized initial bets.
Notable Mentions: Discussion referenced Constellation Software (CSU) after a valuation reset and AMC’s brief gold-mine episode; TSXV and IWC used as performance markers.
Opportunities & Risks: Opportunities exist in resources and AI-linked micro caps, but investors should remain cycle-aware and focus on management quality and downside control.
Transcript
And we're live. This is Value After Hours. I'm Tobias Carlile, joined as always by my co-host Jake Taylor. Our special guest today, Ian Castle, one of our faves, the maestro of Micro Cap, the maven of Micro Cap. How are you, Ian? >> Doing great. Thanks for having me on. It's always a pleasure. >> You've got some big news. Um, you have acquired Planet Microap. Tell us about that. >> Yeah, I mean it. We did a collaboration with the crafts and planet microcap. They planet microcap they've run events inerson events um in the micro cap ecosystem here in the United States for I think 14 15 years and and micro cap club you know we've we kind of joined joined up with them in 2025 and uh to see how it would go because you know quite honestly running a large event is like planning a large wedding every year and I didn't feel like doing that and that's what they're good at. So >> it's a nightmare. >> Yeah, it's a nightmare. So, uh, I I really wanted to see what we would do if we could, you know, join forces with them and have a larger event and it would get the word out. obviously a micro cap club too and we had a bunch of carved out perks and we had our own clubhouse at the event and so we were very visible you know and and after we did the one in Vegas which was a huge success I think the companies thought it was and everybody involved thought it was it was pretty obvious that you know we should probably kind of join up officially and kind of be under a shared a shared vision. So, you know, just seeing the synergies of kind of the in-person events, you know, pushing people to the online community and then the online community, you know, pushing people to the in-person events, just seeing that flywheel spin, uh, you know, ma made a lot of sense. Um, and that's really the game plan, you know, really just last 15 years and you guys presented at our events that we had for Micro Cap Club. It's really just to expand the space and bring people bring highquality companies, investors, stakeholders into it, you know, and that's how we make the space better and that's what this acquisition helps us do, you know. So, so I'm excited about it. So, yeah, we have a Las Vegas is coming up uh June 16th to the 18th. It's at the Bellagio. Uh we already have I think 220 investors signed up already even though it's six months away. Um you know, and then we >> Is it hot in Vegas in June? It's going to be very hot in Vegas. So, [laughter] last year, >> as if you're going outside the casino. >> I know. >> That's going to be it's going to be torture because last year it was in April and that was pleasant, you know, being outside. But June's going to be a little bit different. But, uh, you know, >> it's so hard to find your way outside. How would you do it? >> Yeah, it's true. [laughter] Those everything just leads to the casino anyway. But >> how what's been happening in in the micro cap space uh over the last 12 months? I mean, I think it's pretty similar to what's been happening in the overall market. You know, it's it's risk on. You know, for the first time, I think in a well, first time in a few years, you've seen the IWC, the Eyesshares Micro Cap ETF outperform the S&P in 25, you know, and >> we're back, baby. >> Yeah. And and I I was talking to Charles Payne on Fox Business the other day about this. I was like, and that's not necessarily a good sign because it's usually an indicator that the bull market is close to an end, you know, when >> basically a whole bunch of unprofitable micro caps are outperforming the S&P. So, [laughter] >> uh, but we'll see. I don't want to say that the end is near, but it's certainly getting nearer. Uh, but, uh, but yeah, so I I think it's very frothy and just like in any bull market, everyone is all cashed up. You know, everything is reacting to news. uh you know, eight out of 10 stocks are going up. So, you know, you think that you're awesome and skilled um and you forget in neutral or bare market environments that eight out of 10 turns out into one out of 10. Um you know, and when when the market doesn't go up four out of five days. So, uh you know, I think it's I think it's a good time. It's much more fun to be an investor in this environment, but you know, also to be cognizant of likely where we are, you know, in the cycle. Do you see many new issues in micro cap land? >> Yeah, I mean I think a less than there used to be, you know, 10 20 years ago, but I I think normally there are I mean just generally I think there's usually a couple hundred a year that kind of come into the micro cap ecosystem. Um and it usions where you're >> Yeah. Right. Exactly. That's the >> Yeah, >> the new that's been a big thing for me, too. It's like, you know, we one of my main things is like, let's get some good companies, good small profitable companies that are growing to come public, you know, let let's show show them why, you know, because everybody talks about in the financial media about how companies shouldn't be going public. They should stay private longer. You know, a lot of people don't talk about the benefits of being public, which the benefits of being public is the multiple that you can get if you're public versus private. You know, you could you could sell toothpicks and if you can grow 10% and grow the bottom line 25%. If you can do that 5 years in a row, you're going to get to 20 PE. you don't have to sell to private equity for three times cash flow, you know, and so that's the benefit, you know, if you believe in yourself as a small business owner that you can consistently grow the top and bottom line, you know, yeah, 90% of 95% of folks shouldn't be public, but there are probably a lot more that should that haven't even considered it because they think the cost is very high, which it is, but it's not as high as what's been publicized. >> Yeah. Where is that now? I mean, last I heard it was like about a million dollars to stay compliant, but is that >> has that come down? >> Um, I would view it this way. You know, if you want to drive if I want to drive from Pennsylvania up to New York City, I can take different types of cars. I can take a Ferrari or I can take, you know, a 92 Honda Civic, >> you know. So, there's different ways to get the same destination. And um I think for those that are frugal that uh that aren't looking to use consultants for every single decision, you know, I think that it can be a lot less expensive than the numbers that you see printed in articles, you know, and yes, you can you can spend as much as you want too, you know. So yeah, that's the other side of it. >> I always felt that way running a fund where like you'd hear people, oh, it needs to be it's going to be this much operating expenses. Like what are you talking about? I ran a fund on like a tenth of that money. Like what? No. Yeah. [laughter] what are you doing? Maybe I'm like totally missing the boat here, but uh >> Yes, exactly. >> I'm not sure what you're spending all this money on. >> And that that's actually a really good I mean segue, too. It's the same thing. Yeah. Like running a fund, too. you just hear that it's, you know, several hundred,000 a year, you know, or whatever it is, and you're like, "No, it doesn't, you know, doesn't need to be, you know, [laughter] >> what uh sectors and industries have been interesting over the last 12 months like either because they got cheap or got expensive or something happened." >> Yeah. What's fallen down into the pond of >> micro capital? I mean obviously the the big benefactors have been anything resources you know related gold silver copper um anything critical minerals related you know is doing well I mean you can just look at the the TSXV last year in 25 I think was up 67 68% you know for the year u which is kind of funny if you ever want to look at a funny historical chart pull up like a 20-year history of the TSXV it's like literally I think flat over 20 years >> and [laughter] then just this hockey stick straight up. >> Yeah, it's like in commodities markets and it goes, you know, it just goes straight up and it goes back down. [laughter] It's pretty comical. What's actually really funny is when you see some uh some fund managers use the TSXV as a benchmark because they'll be like, you know, I'm up 400% I'm up 400% over the last 10 years compared to the benchmark which is down 30 over 10 years. [laughter] So I think those those areas of the market obviously have that that tailwind associated with them and I think you listen the same thing that's affecting the large caps comes down to us anything AI related >> uh data center related uh you know is doing fairly well you know and I think um yeah I mean I think that's what's what's been kind of pushing a lot of these micro caps is the same things that are pushing the large caps >> any blockbuster the returns any big name any names that have had a giant 2025. >> Um I think that most of I'd have to look at our performance that we track all the companies on the on the club that were profiled but I would imagine a majority of them were resources. I know uh Alante Industries I forget the symbol up in Toronto I think that was up like 1,200% in a year. Um like a a G kind of gold. >> Okay. That'll be >> Yeah. kind of gold's up a,000% in the last 12 months. And again, like some of these companies came from such low bases, you know, that it's not maybe completely reflective of complete operating performance. It's just that they were so under the radar even 12 months ago. They probably were it shouldn't have been as low as what they were is what I'm trying to say. Uh, but I think a lot of the a lot of the outperformance you probably comes from those areas and there's been some huge kind of like AI winners that have come out of that category as well that that that we've seen on the on the club. >> Conversely related to a tweet that you had recently about uh you know hundred different companies you know would if you surveyed 100 micro cap they have a hundred different favorite ideas and they also hate the other 99 that everyone else would say. [laughter] So, and it's funny. >> What do you What do you hate right now? >> Yeah. I I mean, I write that, but it's it's so true. It's like I you know, I I look at ideas all day on on the club and and you just through networking with your friends that are stock pickers and you >> hate it. Hate it. >> 80% of the time you hear something new. You're you're just like listen, you're like, why would you like that? Like that is the dumbest thing I ever heard in my life, you know, and it's still after 20 years. But that's what makes it so fun, you know, is that we all >> And then it was up 1,200%. >> Yeah. Exactly. Yeah. [laughter] And yeah, that that goes into it too. It's like everybody, you know, 10 times more investors like something after it doubles, you know. So, it's just part of the the crowd the the crowd methodology with all of this stuff, you know. The prices the prices lead the narrative, you know. So, >> insane. >> Yeah. But I it it's interesting. I actually You're a You're a baseball fan, aren't you, Jake? You >> I am to put it mildly. >> Yeah. Yeah. >> So, I got I got a statistic to throw at you. I want to see if you if you know this one. >> So, who holds the record for the highest batting average in a single season in professional baseball? >> Oh boy. >> And you don't have to answer that question. >> It's probably something from like, you know, 1897 or something and a guy went two for two in a season or something insane. Well, no, that this is like based on a certain amount of at bats, but I think most people most people would say like Tony Gwyn, uh, you know, I think he had a pretty good season in the 90s and >> Ted Williams was the last one to hit 400, right? So, that's like the last benchmark. >> He's up there, too. Well, you know, you would have never got this because I'm it's not exactly fair how I frame this up, but the guy that actually that the guy with the highest batting average, his name's Gary Reedus, and he did it in 1978 for the Billings Mustangs, a minor league team. Oh, okay. [laughter] Cheater. And what'd he hit? >> He hit 462. And uh you know what was interesting about that is I was looking at at some of the stats around him. You know, that was 1978. Hit 462. He was paid $12,000, you know, and that was less than what Ted Williams made in 1941 for for hitting 400, you know. I think Ted Williams made 20,000. Um, and I looked at what the >> what the uh the fan attendance was of the Billing Mustangs in 1978 and it was like 300 people or something. So, it was, you know, it was only like his close family and friends coming out and watching and and I I was I was thinking about that more. It is a it is almost exactly similar to micro cap investing, right? It's like you can you don't get much fanfare being a micro cap investor, you know, because you're matching smaller sums, but you can >> hit for hours and hit for slugging percentage >> and yeah, you might not be matching 10 billion in micro cap and get paid one and 20 on it and, you know, create that type of lifestyle for yourself. But you can do really, really well for yourself, your family, you know, in the micro cap space. you know, you might not get the fan fair. You might only have 400 people or 200 people in the stands, but uh but that's it's kind of comparable to what I think to to trying to hit in micro cap, you know. [laughter] >> I like that idea. >> Is the the pitching soft relative to the >> pros softball? Yeah. [laughter] >> Okay. >> Did he get did he get the call up after that season? >> I think he did go up for a year or two. >> Tough game. >> I need to dig a little bit more into that. >> Hit 130. >> Yeah. Uh you had some you had some comments about art of execution. Do you want to take us through the art of execution? >> Yeah. Yeah. I mean what >> what's the book? >> I've been reading rereading uh the book art of execution which was written by a portfolio manager named u Lee Freeman Shore. And the book was written, I don't know, maybe back in 2017 or 2016, almost 10 years ago. But it was really interesting because he invested over a billion dollars with the world's top fund managers. I think he he invested with 45 of them and they were, you know, some of them were billionaires, you know, a lot of them on TV. Uh, and he gave each one of them between 10 and $50 million. And what he told them was they could only invest in their best 10 ideas. So 10 ideas only. And then over a period of several years, he kind of tracked their decision-m and um I think that was I think a total of 1,800 or so total investments made across those managers over that duration or a period of time. And he he wrote this book on on what he found out about it. And one of the key things he found out was when he analyzed the data, you know, the best stock pickers, fund managers in the world investing their top 10 ideas, only 49% were winning stocks. So basically, you know, these these great stock figures, it was a flip of a coin whether that stock would actually go up or down. And what was also interesting was the best performing fund manager that he was with, he was ranked three out of 10 times. So even you know less than the average and uh >> it's like a VC type distribution. >> Yeah, it feels like that. And it's >> and it's interesting too because I think if you would ask this question to stock pickers or fund managers, you know, what's your hit rate? >> You know, I think most people they're going to say 60%. You know, they're not going to say 40 because it sounds like you're a because you were late to write four out of 10 times, right? You're a professional. You're getting paid to do this. >> Yeah. And they're and they're not going to say 80 because that sounds like you're just being overconfident, you know, and so everybody just kind of falls in the middle. >> It depends on how attractive the person is that you're you're telling the [laughter] story to, >> right? >> You know, so nobody says like 40 or 50% because it just nobody wants to admit that it's a coin flip. At least be right or wrong. Yeah. And so that was kind of one of the first points he made. But it also kind it also proved that you the money is made after the decision, you know, and the money is made on how you react to when stocks are winning or losing, you know, if half the time they're winning or losing. And what he ended up doing was he put in the book he describes, you know, these different tribes. Um, and you know, people that the people that were in the tribe of winning, he put like he called them rabbits, assassins, or hunters. He put them in these three categories, kind of like psychological tribes that you're in with your winning. And so if you're winning and you're a rabbit, I'm sorry, I'm going to reframe this. Let's get let's go through the losing first. So the three categories of losing are rabbit, assassin, hunter. So if you're a rabbit, he said this is the most dangerous category because when a stock drops, you know, the rabbit freezes and it's like a creature in headlights and they don't do anything. You know, stocks down 30 40%. They don't do anything. >> Shell shocked. >> Yeah. Exactly. Um, and they forget that, you know, a stock that goes down 50% has to go up 100% to get back to break even, let alone something that goes down 90%, you know, has to go up 900%, you know, to break even. And so they they find them rabbits find themselves in holes, hence the name rabbit, you know. So that's that's one category of, you know, psychological behavior that that he witnessed. And he said the assassins and most of the investors that he invested in he would say were assassins. They were traders. They had no emotional attachment to the companies. And so if a stock dropped 20 30 40% they were quick to kill the position, just sell it. And he was saying this was a good attribute to have because you were kind of limiting the damage, limiting the downside risk. Um and then the third one is Hunter. And he and this is the rarest breed. I think it was like 1 or 2% of the managers fell into this category and they actually were the ones that required kind of a strong constitution and the ability to double down you know when the when the business was fine but the stock was just dropping and you know one of the main takeaways was was obviously that you know you need to be kind of a mixture of assassin and and hunter in this regard. Um, so anyway, I was just rereading that that was a three and so the two >> just before you move on from that it's it's kind of a it's that's not what I would have expected. Uh, because I think that most people double down, don't they? Do most most people keep on buying all the way down? Do you think that's wrong? I mean, is that characterization wrong? Do you think most people keep on buying on the way down? >> Um, it's a good question. I I do think that it's more prevalent. You know, people that just average down just because a stock is down, not realizing that probably 80% of the time a stock's dropping, especially if it's not macro related, it's probably because the business is deteriorating cuz of those three options. So, you can buy some more, you can ignore it and hope it recovers and just let it go to zero if it doesn't or cut the position. I would have said cut the position is probably the you know I guess it depends on the circumstances but cut the position without knowing anything else that's probably the worst decision. >> Yeah, >> do nothing is probably the neutral position and buying a little bit more is probably the better decision given that you've you've done this work, you've done some diligence, you know something about this stock, >> the stock price can fall in a quarter 50% and nothing much has changed. >> And I would have thought that blindly buying a little bit more would have been a that would have been the thing that most people do anyway and that would have been probably the better thing to do. But I don't know that's an interesting finding. >> Well, the >> were there were there any commonalities of when you doubled down and it worked? >> Well, I think he teased out of that. >> He pulls in the hunter thread a little bit more. He he talks about how it's not just blindly averaging down. You know, these are, you know, they they were strictly tracking the business. They believe the business trajectory was the same, if not better, than it was before. You know, so it's not just blind. You're not buying it more because it just dropped. >> It's hard to tell quarter to quarter, right? >> It is. No, it is. Like I said, these are just broad categories, Toby. I didn't write the >> Don't overthink it, buddy. >> That's That's what a podcast is for. Let's talk about it. I got I got one of the world's cap investors here. I'm going to ask you. >> Got time to kill. Well, I do think that, you know, kind of a segue from this is I do think a lot of the problems with lose, you know, when you're losing in a position, it's usually a product of bad position sizing at the onset, I find. >> Um, but if you just assume a random walk for every position that you put on, >> there's no the market doesn't know that you've bought it as much as you would like the market to know and immediately turn around and start going up. I mean the reality is that most of the time you're buying them because there's some dislocation between price and valuation. So >> as Einhorn points out on the on the short side, you know, if it's half price, then one/ird price is no less irrational than half price or 2/3 price or whatever it might be. >> Y >> So I just I don't know. It's I think it's a funny finding. I'm just kind of interested. >> Yeah. I have a a friend who um quite clever in he has a rule that if any position that's down 20%. Automatically triggers a review and he has to decide either you cut it or you add to it but you can't just sit there. So you're kind of forcing to either be >> an assassin or a hunter. But you can't be a rabbit. >> 20 is pretty r 20 is not much of a move though. Like that's that's that could be noise at 20. 50 is more of a move. A third is more of a move, especially at micro cap. So, it's probably more relevant. Two days. Exactly. [laughter] >> He traffs in some bigger names. So, that's probably maybe answer some of your your question. [laughter] >> Fair enough. Fair enough. >> Seems like a good rule, though. I mean, at least >> can't sit there and suck your thumb. >> Yeah. And and I think the book is interesting just because it does divide it up into these categories and makes you self-reflect a little bit about where you are, what you kind of overemphasize or where your mistakes are and and why >> about on the winner side of naming these guys and what >> and why a tool like journalic is a good idea. So sorry. >> Oh, good idea. >> It reminds me a little bit of that, you know, John Hemp, who's the Aussie fund manager who does a lot of shorting. He had a he had probably the best post that I've ever seen on it where he talked about doubling down or or the conditions that you need to increase the position size. And we had a guest on I forget who it was but over the last month or so who was talking about I think it's an old joke where you know people have lost like 25% of the portfolio in one you know 8% position or something like that just because they keep on doubling down >> when it goes down. I don't know if there's any right answer. It's one of those you only find out if you're right. >> Yeah after the fact. Yeah. >> Yeah. I know. It It's definitely something I do feel like averaging down for a micro cap investor is probably one of the biggest mistakes. >> Um >> because there's no flaw because it's so easy for them just to disappear. >> Yeah. And Yes. Yeah. And and and I think the the only time you really want to and again you're always going to have a day or the or week or month where you know it just gets pulled down randomly for some random reason but I'm talking about you know one year, two year, three years you keep averaging down into something you know not not three weeks in a row. Uh you know I do think that's where a lot of the biggest mistakes are made. >> You know when you've kind of just lost track with all of reality you know that you're just trying to prove the market wrong you know by continuing to bury yourself in a position. But I feel like that that behavior is much more common or or ignoring the position is much more common than someone who cuts the position who just gets frightened out immediately. I don't know. Maybe that's >> Yeah. >> Maybe you want to be right more than >> for sure. >> Care about making money, right? >> For sure. I mean, it makes >> you're teeing up the veggies really well right now. By the way, >> that you know that Bessim Binda Besser study which I don't know I I've seen some criticism of I haven't fully internalized it, but and I don't really understand his study either, but he says that like basically most companies go to zero and I think that he's an advocate for therefore investing in the index which is always like in the biggest in whatever's working at the time. But that would seem to be the case like if if that is in fact true and most companies go to zero and you start losing in a position then cutting it is the is the more sensible position. But then if you talk to someone like >> bad news for you Toby on a long enough time horizon they all go to zero. Wow. That's probably >> that's what I was going to say, >> especially since 1926 or whatever that >> Yeah. when it started. >> Yeah. >> But then if you talk to someone like, you know, Buffett or lots of lots of value investors, they would say that a big chunk of their return comes from trading around positions, like trimming them when they go up too much and and buying some more when they go down. >> Yeah, I'm I'm a fan of that approach. I mean I I think especially for you know high conviction long only investors and small caps or whatever. I mean you do build up this knowledge level of a business and you almost feel like you have a sense of the pulse on the company and the stock after a while. >> Um and I and I think you yeah over a 10-year period there's no reason you can't make a lot of money from the same stock and doesn't mean you the whole time. >> And if you know it really well and it's down more it's just >> yogen. What about on the long >> one of the ironies of of that with you have a very volatile even the business results if you know that they're not maybe they're a little bit more cyclical or I think this is a good example of like Fairfax versus Bergkshire like Bergkshire is a better business on almost every criteria that you could imagine but the price doesn't really dislocate because it's so steady and so actually chances to make more money on Fairfax over the years actually than Bergkshire because of that, you know, the results weren't as good, the market overreacts, you can take advantage of it, then maybe you sell into an overreaction the other direction. It's there's some it's it's one of those things. It's like, oh, do you want the the lumpy 15 or the smooth 12 kind of thing that Buffett's talked about? >> Yeah, I think we we need we need to close it off on the long side, too, because we haven't we haven't discussed the long side. >> Yes. Yes. Sorry. >> The winners. >> Oh, yes. The winners. So, there there was two >> Let's win. >> Yeah. There's two tribes on the winning side. The one was called Raiders. And you know, basically Raiders are the people that just sell their position very quickly after a 10 or 20% gain, you know, and I think a m a majority of the folks that he invested in, not a majority, but a decent percentage were he would coin as these raiders. Like they never let winners run. Uh they were they were quick to take the easy 10 or 20%. >> The other side >> and those that's the more favorable side. That's the >> No, no, no. That's that's a bad side. >> Yeah. Okay. Uh The more favorable side is the connoisseurs and these are the folks that you know develop deep conviction. [clears throat] They love they were very boring individuals because they're always in the same stocks you know and they were able to hold on to things for you know thousand% plus returns over time >> and that's really where the the real money was made. His his argument against the raider mentality is you just don't make enough money to make up for the losses you take along the way when you're only getting 10 or 20% here and there. I think that's one of the things that I noticed when I test. You know, Graham's got the net net rule where he talks about you sell after two years or a 50% gain. And the 50% gain definitely hurts returns because >> that that particular group of companies are characterized by Yeah. But >> lots of them don't work. Like that's a really good example of a lot of them don't work, but you get a handful of big winners and you need the winners to >> 10 or 20x to pay for the rest of the portfolio. That's not really working. Yeah. >> Yeah. >> I think friend of the show uh Kevin Zatlucl wrote a paper on this that the it's kind of a horseshoe looking shape of you have like VC on one side that's very power law driven you know a few of the startups make all the money and then actually your outcomes on like deep value bucket is also like that very power law like there's just a couple names in the portfolio that drive all the outperformance and the rest are kind of like duds or or you know break even which you would think these things are like so opposite of each other and yet uh they have the same characteristic of kind of return profiles. >> Yeah. >> Yeah. Uh so his main kind of takeaway was just that all the successful managers they they let you know that they have a philosophy around letting winners run, you know, and and I think one of the other takeaways and I've written about this before is you know I'm okay trimming. I trim stocks all the time, you know, but don't I I kind of have a firm fast rule is yes, I I do sell when things get overvalued and and sell a decent chunk of something, but I try not to sell all of it >> because usually, you know, you'll miss out on Yeah. the 5% that actually that right tail continues, you know. So, yeah, I think it's good. I think it's okay to trim. Just don't sell all the winners. >> I've done tests where I just turn off my cell rules and just hold them forever. And one of the problems that you get with that is you get to the end and you have a handful and it's not so much a problem because we're always the study finishes in the present day and whatever is working in the present day is a big chunk of the portfolio. But then you have this question right at that point. Well, now I've got something that's 15% of the portfolio that's up. >> I thought it was more in a lot of them. There was like >> Yeah. across the entire portfolio. Like 15 I think is about the biggest I've ever seen starting at like a pretty small like that's starting at a one or two or 3% position. >> Okay. >> And but but even 15 like you've got a decision at that point. Do you want to go forward with a 15% position or >> trim that one back or what are you doing? So now you're really beholden to whatever that big position does. >> And that's something that's right at the end of it's had a really great run. like everything's worked and the multiples way up and everybody loves it and you look like a genius because it's the biggest thing in your portfolio, >> but now you got to make a decision. >> Now you you got rich. Do you want to stay rich? >> And the other side is funny too because it's always it's it's looks to me like it's completely random. I go through the portfolios when they're bought and I'm like, well, you know, I like these ones cuz they're names that I recognize and it's some of the stuff I've just never heard of before and it's the stuff I've never heard of before that's like a 15 or 20x over 20 years. >> Yeah. Well, I mean to that point, Toby, to to what you're mentioning, I I think a way an area that I've definitely evolved is this belief that, you know, high conviction means high concentration, which means high at cost positions, you know, and and and I I now I tend to take kind of smaller at cost positions, you know, especially in micro cap where it's probably good anyway to to see the management team can execute, you know, for a few more quarters. Uh because you know the the main difference between me cap and large caps is just the shelf lives are shorter. The moves can be more fleeting. They can last they're usually two to four to six quarters. You know it's not 10 years. You know we all want it to be 10 years but that's just not reality. You try to live in reality not what you hope the world would be that you could coffee can these things. Um, and so you I've kind of reconstructed my beliefs around that and the number of positions and the at cost position sizing and things like that to reflect that. And I still love large positions, don't get me wrong, but I find that like the bigger the at cost position, the harder it is to do the right thing. And, you know, when it when I started it smaller, you know, and let the position earn its right to that larger position size, it's easier to sleep at night. Uh, and I would love to have a 20% position and and we have that. Earned the right to get there, but it wasn't from me >> trying to prove to the market it's wrong. >> Wasn't from you buying 25% position. >> Exactly. Yeah. Yeah. 100%. Yeah. Because it's always it's always those smaller positions, ones that uh that do better than the largest highest conviction one when you form it at cost because it's the one that you like it hit all the big boxes and you don't follow it quite as closely. You don't emotionally think about it so often. You give it the the time and the room it needs to breathe in the portfolio. Not overanalyzing some Google alert you got on a random news event of a butterfly farting in China, you know? You know, it's like you're you're letting it just mature, you know? [laughter] So, it's easier to let them grow. >> I think we should I want to keep on talking about this, but let's do veggies and come back to conviction and concentration. JT? >> Yes, sir. So, we we're going to be talking about the four idols. Uh, and there's this this kind of strange thing about investing that we probably don't talk enough about. And, you know, on the surface, a lot of times it looks like math where it's discounted cash flows, expected returns, risk premium, etc., all very clean, all very rational. But anyone who's spent real time in markets like Ian has, they know that investing is is not just this kind of technical exercise. It's the psychological one. And even more than that, it can kind of be a moral one. And you know, markets don't just reveal information. They they kind of reveal us ourselves. And we can learn about ourselves a lot in markets. Uh often paying high tuition for that that self-nowledge. Uh and it's easy to forget that stocks, they don't care who owns them. And they they don't care how much you paid for them either. Uh and we can discover often what we fear, what we want, uh what we what we think will make us feel safe or important or complete. uh nearly 800 years ago, this guy Thomas Aquinus made an observation that that is still feels quite modern. And a little bit of background about old Tom there before we uh we get in because he was a bit of an interesting character. Uh he was born into a wealthy noble family in southern Italy and they expected him to become this powerful Benedicting abbott and essentially like kind of a feudal lord with you know spiritual overtones to it and instead he joined this other Dominican order which was this kind of new I think the term is mendicant um and they he committed to the basically like poverty studying and and preaching and his family was absolutely furious with him. At one point his brothers kidnapped him and imprisoned him for like a year attempting to force him coming to abandon the Dominicans and come back to to their side. Uh and you [clears throat] know he was famously this really like large and quiet and kind of socially awkward guy. And his fellow students nicknamed him the dumb ox because he spoke like so little in class. Uh, and one of the strangest facts about him was that near the end of his life, he he just abruptly stopped writing and he had this mystical experience during a mass in 1273 and he reportedly said that all that I've written seems like straw to me. Like he's just like, I'm I'm over it. Um, anyway, back to to Thomas. He he argued that that human dissatisfaction doesn't come primarily from hardship or scarcity, but from actually misdirected desires. So when people you know they take infinite they take finite things and then they ask them to deliver this infinite meaning to them and then they risk turning these things into idols and in kind of the religious sense. Um and he identified four idols specifically wealth, power, pleasure and honor. uh and each one promises some flavor of fulfillment to you and each one activates like real psychological reward systems inside your brain and then each one ultimately fails you uh if taken too far. So, uh modern writers like Arthur Brooks have have translated a lot of this into like more secular language for us. But um you know it is it is dopamine loops, it's it's h hadonic treadmills, status reinforcement, like all these things. uh and short-term happiness never quite becomes that lasting feeling of well-being that you're really chasing after. Um and these these idols show up in the investing world as well. So what I want to do for the rest of the segment is is walk through these four idols and not as this abstract philosophy but maybe as investor archetypes. Um and you you'll see these these idols manifest in others and and if you've been do investing long enough uh you might even recognize some of these in yourself. Uh so let's start with the first one which is money. uh not money as a tool or money as a means to live a good life, but money as as giving you meaning and as as the thing that will finally make everything feel okay for you. U Aquinus warned that wealth is uniquely deceptive because it looks infinitely expandable. There's always more to earn, more to optimize, more to protect. And unlike food and shelter, wealth never really tells you when you're done. There's no like real satiation to achieve potentially. So in modern markets, best idol produces what maybe we'll call like the accumulator. And that's someone who they're investing primarily as a mechanism for maximizing net worth. You know, portfolio size becomes the scoreboard. Their conversations are around net worth. It's really stripped of any reference as to what the the meaning what's the meaning of the money for them. What can you actually do with it in the real world? Uh and and this they w they like watching the numbers go up because it feels like progress, like competence, uh like armor against uncertainty. And of course, you know, saving money is all to the good. I would never argue against that. Uh but you know, there's a trap there that once kind of basic comforts are met, that additional wealth doesn't produce the emotional returns that you would want. Uh and it's it's kind of this especially if you have this the hole in your soul that you can't fill like money's not going to do it. So if [cough and clears throat] uh let's jump to the next one, which is power as the idol. And this is a desire to command outcomes to impose order to eliminate randomness. And for Aquinus, power temps because it offers this illusion of of self-sufficiency. Uh and if if your control of everything is total, then you're like you have no vulnerability. So in markets, this might be called like the controller we'll use as a generic term. And uh it's primarily focused on returns in isolation and focused on it's not necessarily returns, it's about having the the agency, right? uh influence shaping events rather than just participating in them. So the archetype is probably activist investors pressuring management or maybe even like macro traders who you know they're trying to outguess central bank pronouncements and you feel like you have this control over the system because you understand it. Uh and action itself becomes this psychologically rewarding sense of urgency. Um and so [clears throat] you want to feel smart and decisive and relevant. But markets are are nonlinear. They're they're not mechanical. They're complex adaptive systems. Control over any complex adaptive system is is elucery. And this dissatisfaction loop appears where reality just doesn't comply with what you want it to do. Uh it could be incredibly frustrating. Uh and each failure then demands more intervention, more leverage, more complexity, more more confidence in the whole scheme and eventually you know market enforces that humility sometimes violently. uh and and then you're basically your pursuit of power will collapse under randomness eventually. So third idol pleasure Aquinus understood that that pleasure is inherently transient. It exists only in the moment. It can't be stored. Uh it demands constant novelty as well. So in markets this might be called the speculator. Uh and you're treating investing as a as sim as stimulation really. Um you know volatility isn't risk. gets sort of the whole point like I want I want action options, crypto cycles, meme stocks, you know, rapidly shifting strategies. You need that action and it's rooting, you know, maybe even today now it's rooting for that team to go for two to cover the spread. Uh it's I think we're living in a world where the the the speculator is is having their moment. Um but the the objective isn't long-term business ownership. It it's it's an emotional engagement. The payoffs are usually need to be immediate to hit that dopamine. Um, and losses, you know, at least you got it got your pulse up. U, and of course, social media is terrible for amplifying all of this. Uh, even your near misses kind of reinforce bad behavior of like, well, I almost won. I better get back in there and double down. U, [clears throat] but of course, you know, like pleasure has a short halflife. Yesterday's thrill becomes today's baseline. And to feel that same intensity of the the feeling, the stakes have to increase the frequency, the leverage. Like, you can't just sort of like stay in place there. There's that hydonic treadmill again. So when [clears throat] often what starts as excitement ends in exhaustion and ruin. All right, last one. Idol. Uh the fourth idol is honor and not the way that we sort of think of it as you know today we might call uh like you know oh this is an honorable person. This is more like fame, prestige, recognition, people thinking that you're smart. And Aquinus warned that honor in this context is is uniquely unstable because it depends on other people's opinions of you. It's not about yourself. So they can grant it or withdraw it from you at their whim, not at your consent. And this idol might be we might call like the narrator. U and they invest not just for returns but for recognition. Like you want to be right and that matters a lot more than even the financial game. You want to prove everybody else wrong. You know, visibility becomes the currency. Platforms, you know, Twitter, podcasts, conferences. You want to turn investment views into this public scorecard that you has this this psychological payoff of social validation with followers and likes and invitations and all this stuff. Michael Lewis writing your story up. But, you know, and and it feels good to get things correct and have the proof of it and to show off to the world, but you know, markets are cyclical. reputations can be fragile to these things. That that dissatisfaction loop that comes from it um you know when the performance diverges from the narrative, these public positions then become identity traps and you fall prey to them in this commitment consistency bias way and now updating beliefs feels like you're waffling or some kind of self- betrayal and like no one wants that feeling. So honor pursued too far as an idol converts investing into almost this theater of you showing off. um you know, maybe even when it's at its worst, you're you're pulling TikTok names out of a scrabble bag. Uh but the portfolio becomes secondary to this persona. And so to be clear, you know, none of these idols are inherently evil. Money is useful. Power can catalyze change. Pleasure is part of life. Honor can reflect real contribution. The problem is is not their presence. It's their elevation above everything. It's when they get taken too far. And markets are very expensive mirrors to discover yourself. But and and eventually though they do provide an accurate reflection. So the danger I'm going to give like what uh these idols a little tip for everybody to wrap things up to make this a little bit more practical. Before you place the next trade, ask yourself this rude little diagnostic question. Which of Aquinus's idols might I be feeding right now? So more specifically like is it money? If I doubled my net worth today, what would I stop doing? And why haven't I stopped already? Uh, and can I practice stewardship instead of hoarding? Is it power? Where am I confusing activity with control? Instead of like practice humility instead, build a process that expects randomness and can survive being wrong on occasion. Is it pleasure? Which investments are actually just entertainment with a ticker? You know, instead practice temperance. If you want entertainment, you know, buy it honestly. Like, don't disguise it as investing. And then lastly, is it honor? Where am I defending a story because it's mine, not because it's actually true? Instead, practice integrity. Follow your own inner scorecard and let let being right be incidental part of it and not this metaphorical hill that you're willing to die on. >> The end. >> Brilliant. JT, >> great job. >> Harsh, brutal. Yeah, >> Thomas Aquinus was brought the uh the brilliance. I just recycled it. >> All in there a little bit. >> Yeah. No, we all have it. It's just how much do you let it out of the let the beast out of the cage. >> That's a good that's a good reminder. >> So I think I think we probably all suffer from all of those in varying degrees, right? >> Yes. >> Guilty. [laughter] >> Yeah. So I guess what >> you were saying on the accumulator side, you know, your you your last points there were about how do you not contradict those those things, but maybe how to counterbalance them if you do suffer from them in varying degrees. And so if you're an accumulator, maybe the the way to do it is through stewardship or tithing or whatever where you know, yes, I'm getting wealthier, but the same percentage is going to the church or whatever you believe, you know. So at least have it be for >> at the very least at least a good cause is benefiting by your wealth [laughter] >> to counterbalance. >> Yeah. Not just for more. >> Yeah. Yeah. That was good stuff. Um let's let me do an ugly segue. I get I get in trouble for segueing away from you too quickly, JT with that. But sometimes I'm I'm I'm as overwhelmed as everybody else. I'm processing and and uh I'm processing that one. So uh if you've got great questions for JT, stick them in the thing. I'll ask him. But uh we're going to have a quick chat about >> he won't answer. >> I'll ask um let's go back to con I think that we've we've we've got this the same theme for the whole thing today really. But back to that concentration versus conviction question which I think is is sometimes it's a little bit hard to discuss in the abstract because we probably need to know the circumstances of every position to to to talk about it. I do think it's an interesting um topic of discussion because it's [snorts] uh >> Can I ask can I ask Ian a question on this specifically? >> Please just put me out of my misery. >> Yeah. a hypothesis that I I have is that there's some kind of curve of of marginal utility on research that once you get over you're you it starts to flatten out and there's a certain point where you're adding to your budget of time of like learning a company and you're adding to your conviction and maybe you're even adding to the position because you're like oh I know this cold right like I know this better than anybody I've done so much work on it and you're adding that confidence that conviction, but your confidence is probably growing at a slower rate than your your confidence is. And so, you're going to end up like sort of offkilter from do you really know it as well as you think you do? And is there some sweet spot on the curve there where you're like, I should probably just shut it down here because otherwise I'm getting over my skis on on research and I'm just going to add to my overconfidence and not my competence. >> No, I I think you're exactly right. I mean, I think there's and a lot of the research, at least what I found is a lot of the researching can only happen there's only so much upfront work you can do, you know, and I feel like you can overdo it on the upfront side, especially with kind of micro caps that tend to be simpler businesses and and kind of value propositions, you know, to where a lot of times for me at least since I'm a hightouch kind of management focused investor, you know, the a lot of the research happens after, you know, at least the initial purchase. you know, and and it just changes things. When >> management knows you own the stock, it changes the conversation. And it's about accumulating more and more knowledge over time, not necessarily forcing the accumulation of knowledge. Uh, one of my mentors in the business was a full-time private investor, and he built a portfolio of a few hundred thousand up to about a hundred million investing in micro caps um over a course of 25 or 30 years. And just a cool cool guy. And you know, he was just telling me last time we chatted about when one of his positions he's owned for five or six years and he probably still spends 2 hours a week on diligence on that name even though he's been in it that long >> of a position. So, it's just that constant accumulation of knowledge and I think if we were going to have Jason Hirschman on here, you know, who we all because he's been on this program before and you know, everyone knows that he's been an expel for a long time, you know, and I think he would probably say the same thing like it's even though he probably knows that story cold, you know, he's still continuing to do due diligence on it, keep up to date with the different forces or, you know, tailwinds or headwinds, whatever it's facing, geopolitical ones. whether it's in China or here or whatever, you know, I don't think it ever stops. But I I do think it gets back to position sizing, too. There is a limit to how much you can do up front. And for me, in the way I invest, like if if it's not painfully obvious after a day of research, you know, it's a pass, >> you know, if I have to pull out the 12, >> you're talking yourself into something, right? >> Yeah. something's wrong, you know, and and that's more that's it's not that's maybe different for everybody, you know, but I'm, you know, I'm looking for things that can hopefully two or 3x over a threeyear period. I'm not looking for, you know, a 12.1% return per year, you know, so it's a different >> You say that you would only suggest that though if if you're have 20 years in the business because you've seen the patterns now and so it's like if it doesn't jump out to you immediately, it probably won't. Whereas if you're newer, you might not have that pattern match yet. >> Yeah. No, absolutely. That's where the pattern recognition, you know, comes into play over a couple of decades. You know, you get to you get to you're actually able to react quicker. >> I think >> and I think I think it also allows you to to hold more positions as well versus, you know, when I was in my 20s, I would hold three or four positions. >> You in my 30s, it was 5 to seven, you know, and now it's 10 to 15. Um, and I feel like I can get the same absolute return out of a portfolio with less risk, you know, with 10 to 15 than I did even with four or five. >> And I think it's a lot of that's just pattern recognition, the ability to >> to see these things. You know, you're kind of an art collector that's looking for the next Monae or Picasso and there's only one or two that come up per year and you just kind of wait for when they come up for sale or whatever it is or some emerging artist. It's kind of the same thing. I think about it sometimes in terms of the you know that simple algorithms beat expert investors or experts because once you get past six or seven important pieces of information then the sort of the materiality of each additional piece of information is less and I would like the the analogy that I would give is of if you have a sector specialist who knows everything in oil and gas or whatever the case may be >> but oil and gas is really expensive then their best position or their best idea in that is not going to be as good as somebody who's got less understanding, but is looking at least at another industry that's all beaten up and as close to, you know, is bombed out. If they're looking in there, then it's probably more likely that there's a better position in the beaten up sector than there is in the thing that's at at all-time highs. then you might be better off taking some of that research away from the thing that's already working and is a big part of your portfolio and spend it looking at something you don't understand or an area you don't know about because there might be something there. >> Yeah, it's and it's yeah, it's an opportunity to expand your circle of competence that way because I do think it's actually easier to find outlier management teams in beaten up industries. You know, when when you see an industry facing headwinds and there's a company or two that are still growing in that environment, >> they're obviously taking share >> and you can look at their behavior. >> That's when the Spidey sense goes off like they're obviously doing something different, you know, and then you can dive in. We've done a lot of that in this micro cap side, you know, first with resources and oil and gas over the last few years trying to find it's actually easier to find the great leaders in these small companies in that market environment versus when everything's zooming down. >> Yeah, >> there's a good question here. What do you think about Phil Fish's take on concentration? It depends on how diversified are the sources of revenue of the company, different customer bases, products, geographies. I think that's a good I think you could just broaden it out to say um >> it's something that we were talking about before like how >> the the how certain are you of the outcome >> or what is the downside the range of possibilities look like including the downside for as a as a con as a sizing conviction like using Kelly or something like that. How do you think about that Ian? Well, I I think each position is different, you know, and I think it's it is important to look at every individual position through the lens of what's the upside downside ratio and then, you know, produce your position size based off that. Like each one of the companies I have has a different downside and a different upside and obviously not all of the all the risk is knowable, but you know, I think a decent chunk of it is or at least you could imagine it. And especially the good thing about micro or the bad thing about micro caps is they all have 50% downside. It doesn't matter. So that's the starting point. [laughter] >> You don't even have to. >> So when you're developing >> Yeah. There's none of this. >> Yeah. They can all go down 50 or 70%. >> That's the bit ass. [laughter] >> But I think I think it does start there. And you know the because I've invested so long, I don't have a single kind of flavor of investing that I would or I'm not a single flavor of investor. You know, I have I have some story stocks in my portfolio, god forbid, that have no revenue, no earnings. I have growth stocks that have some revenue and no earnings. I have GARP stocks that have revenue and earnings. And I have some deep value stocks. And I have, you know, a gold stock beside a med medical technology company, you know, and each one of those flavors of business and industries has its own unique set of risks in the business andor around the business. Uh, and just trying to figure out, okay, you know, this is a story stock. I think the upside is 10x. I think the down or upside is 10x. I think the downside is 80%. Um, you know, how do you put this position on? And I can have high conviction in that story stock the same as I can have high conviction in a deep value name trade at half a book value. But the initial position sizing will be different because of that that risk is different between those two simply because of the fundamentals of the of the company. And the the common denominator amongst the companies I invest in is at least I perceive that they have very good management. you know that that is the common denominator amongst those industries or flavors or whatever you want to call it and that's the first thing I look for and what attracts me you know to an investment is is the people I'm pretty agnostic to the to the industry >> has uh AI proven helpful yet on management assessment >> um I do I think it's help helps dig a little better you know in some of the some of the people so yeah I mean it's definitely a an amazing tool Yeah, we see the bad effects on Micro Cap Club, but you know, I think 80% of the applications are AI generated and it's and it's obvious and that's the that's the most annoying thing. I was like, at least don't make it obvious, you know. >> Have you seen the uh output of writeups in micro cap as the cost of producing a writeup now you could just like put a ticker in and kind of kick off a script and it'll go put an okay report together. Have you seen a proliferation? No, I mean we see a lot of AI generated writeups and we flag them, you know, and I think that I think it's great to use it as part of the write up, but I think you still need to add your narrative, you know, to it and add some differential insights to whatever that AI generated thing, you know, popped out at you. >> Yeah. Uh because even you know when I use Gemini deep research deep research or whatever you'll still find errors all over the place you know where it just gets stuff completely wrong. >> Um and so you have to verify >> but it's so confident when it says it. >> I know it is. It's it's very commanding. Yeah. [laughter] >> And then when you point out that it's wrong it just it apologizes so quickly and just moves on. [laughter] >> Uh does does AMC did does AMC still own the gold mine? Did they buy a gold mine? Was it producing? Do you guys follow that at all? >> I I vaguely remember that happening. I'm not sure that's >> Is it still >> You said one of your positions you said was like a medical equipment with a gold mine inside it. >> No, no. I was just saying that I have >> I have a gold I have portfolio. Yeah. Different types of gold exposure in the portfolio, but no, not a medical technology with a gold mine in it. That would be >> I was just wondering if AMC's participated in this in this run if it's come back because of the gold because of the gold mine. >> We're go we're going back to 1980s conglomerates where like no businesses that made no sense to bring together all brought together. [laughter] >> Yeah. How long till we get the uh like a gold treasury company instead of you know Bitcoin treasury? >> Getting closer. Micro kept treasury company. [laughter] I don't even want to know how much the investment banks made in 2025 and all the money they raised for those crypto depository companies and and whatnot. It's it's probably revolting to know. [laughter] >> So, they're down a little bit too. A few of them I've had a look recently. >> Yeah. >> Oh, they s AMC did it, but they sold it. Thank you. Thank you, John. Uh they let me know. There was another good question. >> We don't need AI. We have the hive mind. >> Toby, what's what's cheap right now? Like what's >> gas? I was going to say oil gas, right? >> You have to you have to there's a there's a glut the size of the 2020 glut, you know, not quite, but there's a there's a lot of oil around, but um everything's cheap. The multiples are down. So, and it's it's had, you know, the who knows what the commodity does, but the commodities lots of commodities have run. So I think energy is kind of interesting here. Everything else has um had a little run. I think probably some banks are interesting. Some insurers are interesting. Yeah. But I think oil and gas is dominant and I think some of the consumerf facing um retail well or a lot of retail is consumerf facing but I think the consumer has been pretty beaten up over the last three or four years and so consumer retail is bombed out. >> Toby, when are the all those SAS darlings going to fall into your screen? That's what I want to know. They're a long way off, but um I I [laughter] look I'd love for something to const like Constellation to come in. Constellation's off 50% got a you know 6% free cash flow yield on the screen and I I hear that it's a little bit higher than that in actuality. So constellation CSU at some point pretty good compound although I guess you got to deal with >> Leonard stepping back and a pivot in their strategy away from VMS into whatever they're going to I don't know a lot about it, but it's it's one of the I think it's interesting just off the top of my head. That's not that's not an investment advice either, folks. >> Yeah. Not not advice. I think it went from 60 to 25 times. So, it feels cheap, but it's not as cheap as it feels. >> But it's never really got cheap. If you look back, it's never really had a big draw down. It's never really got very cheap. >> I know. It's always lived at 40 plus neighborhoods. >> But then it might be it might be a different business going forward. So, it's hard to and it's I guess it's the opposite of the AI trade at the moment. It's the other side might be the but then I don't I don't [snorts] know. I'm inclined to think that they kind of muddle their way through and do all right. But that's uh that's time amigos. Ian uh if folks want to follow along with follow along with what you're doing or get in contact with you, what's the best way of doing that? >> Uh you can follow me on X, it's my name, Ian Castle. You can uh find me on micro cap club, you know, talking about stocks and, you know, it's it's a great resource if you're passionate about microcap investing to find new ideas and and network with with investors from around the world. And if you want to get meet up in person, you know, come to the events, planetmicap.com. >> William, thank you for being one of the true good guys in this industry. You're one you're one of my favorites, so I appreciate you. >> Thanks, Jake. Appreciate it. Second. Um, thanks folks. Uh,
Ian Cassel on MicroCapClub, the PlanetMicroCap acquisition and IntelligentCM | S08 E03
Summary
Transcript
And we're live. This is Value After Hours. I'm Tobias Carlile, joined as always by my co-host Jake Taylor. Our special guest today, Ian Castle, one of our faves, the maestro of Micro Cap, the maven of Micro Cap. How are you, Ian? >> Doing great. Thanks for having me on. It's always a pleasure. >> You've got some big news. Um, you have acquired Planet Microap. Tell us about that. >> Yeah, I mean it. We did a collaboration with the crafts and planet microcap. They planet microcap they've run events inerson events um in the micro cap ecosystem here in the United States for I think 14 15 years and and micro cap club you know we've we kind of joined joined up with them in 2025 and uh to see how it would go because you know quite honestly running a large event is like planning a large wedding every year and I didn't feel like doing that and that's what they're good at. So >> it's a nightmare. >> Yeah, it's a nightmare. So, uh, I I really wanted to see what we would do if we could, you know, join forces with them and have a larger event and it would get the word out. obviously a micro cap club too and we had a bunch of carved out perks and we had our own clubhouse at the event and so we were very visible you know and and after we did the one in Vegas which was a huge success I think the companies thought it was and everybody involved thought it was it was pretty obvious that you know we should probably kind of join up officially and kind of be under a shared a shared vision. So, you know, just seeing the synergies of kind of the in-person events, you know, pushing people to the online community and then the online community, you know, pushing people to the in-person events, just seeing that flywheel spin, uh, you know, ma made a lot of sense. Um, and that's really the game plan, you know, really just last 15 years and you guys presented at our events that we had for Micro Cap Club. It's really just to expand the space and bring people bring highquality companies, investors, stakeholders into it, you know, and that's how we make the space better and that's what this acquisition helps us do, you know. So, so I'm excited about it. So, yeah, we have a Las Vegas is coming up uh June 16th to the 18th. It's at the Bellagio. Uh we already have I think 220 investors signed up already even though it's six months away. Um you know, and then we >> Is it hot in Vegas in June? It's going to be very hot in Vegas. So, [laughter] last year, >> as if you're going outside the casino. >> I know. >> That's going to be it's going to be torture because last year it was in April and that was pleasant, you know, being outside. But June's going to be a little bit different. But, uh, you know, >> it's so hard to find your way outside. How would you do it? >> Yeah, it's true. [laughter] Those everything just leads to the casino anyway. But >> how what's been happening in in the micro cap space uh over the last 12 months? I mean, I think it's pretty similar to what's been happening in the overall market. You know, it's it's risk on. You know, for the first time, I think in a well, first time in a few years, you've seen the IWC, the Eyesshares Micro Cap ETF outperform the S&P in 25, you know, and >> we're back, baby. >> Yeah. And and I I was talking to Charles Payne on Fox Business the other day about this. I was like, and that's not necessarily a good sign because it's usually an indicator that the bull market is close to an end, you know, when >> basically a whole bunch of unprofitable micro caps are outperforming the S&P. So, [laughter] >> uh, but we'll see. I don't want to say that the end is near, but it's certainly getting nearer. Uh, but, uh, but yeah, so I I think it's very frothy and just like in any bull market, everyone is all cashed up. You know, everything is reacting to news. uh you know, eight out of 10 stocks are going up. So, you know, you think that you're awesome and skilled um and you forget in neutral or bare market environments that eight out of 10 turns out into one out of 10. Um you know, and when when the market doesn't go up four out of five days. So, uh you know, I think it's I think it's a good time. It's much more fun to be an investor in this environment, but you know, also to be cognizant of likely where we are, you know, in the cycle. Do you see many new issues in micro cap land? >> Yeah, I mean I think a less than there used to be, you know, 10 20 years ago, but I I think normally there are I mean just generally I think there's usually a couple hundred a year that kind of come into the micro cap ecosystem. Um and it usions where you're >> Yeah. Right. Exactly. That's the >> Yeah, >> the new that's been a big thing for me, too. It's like, you know, we one of my main things is like, let's get some good companies, good small profitable companies that are growing to come public, you know, let let's show show them why, you know, because everybody talks about in the financial media about how companies shouldn't be going public. They should stay private longer. You know, a lot of people don't talk about the benefits of being public, which the benefits of being public is the multiple that you can get if you're public versus private. You know, you could you could sell toothpicks and if you can grow 10% and grow the bottom line 25%. If you can do that 5 years in a row, you're going to get to 20 PE. you don't have to sell to private equity for three times cash flow, you know, and so that's the benefit, you know, if you believe in yourself as a small business owner that you can consistently grow the top and bottom line, you know, yeah, 90% of 95% of folks shouldn't be public, but there are probably a lot more that should that haven't even considered it because they think the cost is very high, which it is, but it's not as high as what's been publicized. >> Yeah. Where is that now? I mean, last I heard it was like about a million dollars to stay compliant, but is that >> has that come down? >> Um, I would view it this way. You know, if you want to drive if I want to drive from Pennsylvania up to New York City, I can take different types of cars. I can take a Ferrari or I can take, you know, a 92 Honda Civic, >> you know. So, there's different ways to get the same destination. And um I think for those that are frugal that uh that aren't looking to use consultants for every single decision, you know, I think that it can be a lot less expensive than the numbers that you see printed in articles, you know, and yes, you can you can spend as much as you want too, you know. So yeah, that's the other side of it. >> I always felt that way running a fund where like you'd hear people, oh, it needs to be it's going to be this much operating expenses. Like what are you talking about? I ran a fund on like a tenth of that money. Like what? No. Yeah. [laughter] what are you doing? Maybe I'm like totally missing the boat here, but uh >> Yes, exactly. >> I'm not sure what you're spending all this money on. >> And that that's actually a really good I mean segue, too. It's the same thing. Yeah. Like running a fund, too. you just hear that it's, you know, several hundred,000 a year, you know, or whatever it is, and you're like, "No, it doesn't, you know, doesn't need to be, you know, [laughter] >> what uh sectors and industries have been interesting over the last 12 months like either because they got cheap or got expensive or something happened." >> Yeah. What's fallen down into the pond of >> micro capital? I mean obviously the the big benefactors have been anything resources you know related gold silver copper um anything critical minerals related you know is doing well I mean you can just look at the the TSXV last year in 25 I think was up 67 68% you know for the year u which is kind of funny if you ever want to look at a funny historical chart pull up like a 20-year history of the TSXV it's like literally I think flat over 20 years >> and [laughter] then just this hockey stick straight up. >> Yeah, it's like in commodities markets and it goes, you know, it just goes straight up and it goes back down. [laughter] It's pretty comical. What's actually really funny is when you see some uh some fund managers use the TSXV as a benchmark because they'll be like, you know, I'm up 400% I'm up 400% over the last 10 years compared to the benchmark which is down 30 over 10 years. [laughter] So I think those those areas of the market obviously have that that tailwind associated with them and I think you listen the same thing that's affecting the large caps comes down to us anything AI related >> uh data center related uh you know is doing fairly well you know and I think um yeah I mean I think that's what's what's been kind of pushing a lot of these micro caps is the same things that are pushing the large caps >> any blockbuster the returns any big name any names that have had a giant 2025. >> Um I think that most of I'd have to look at our performance that we track all the companies on the on the club that were profiled but I would imagine a majority of them were resources. I know uh Alante Industries I forget the symbol up in Toronto I think that was up like 1,200% in a year. Um like a a G kind of gold. >> Okay. That'll be >> Yeah. kind of gold's up a,000% in the last 12 months. And again, like some of these companies came from such low bases, you know, that it's not maybe completely reflective of complete operating performance. It's just that they were so under the radar even 12 months ago. They probably were it shouldn't have been as low as what they were is what I'm trying to say. Uh, but I think a lot of the a lot of the outperformance you probably comes from those areas and there's been some huge kind of like AI winners that have come out of that category as well that that that we've seen on the on the club. >> Conversely related to a tweet that you had recently about uh you know hundred different companies you know would if you surveyed 100 micro cap they have a hundred different favorite ideas and they also hate the other 99 that everyone else would say. [laughter] So, and it's funny. >> What do you What do you hate right now? >> Yeah. I I mean, I write that, but it's it's so true. It's like I you know, I I look at ideas all day on on the club and and you just through networking with your friends that are stock pickers and you >> hate it. Hate it. >> 80% of the time you hear something new. You're you're just like listen, you're like, why would you like that? Like that is the dumbest thing I ever heard in my life, you know, and it's still after 20 years. But that's what makes it so fun, you know, is that we all >> And then it was up 1,200%. >> Yeah. Exactly. Yeah. [laughter] And yeah, that that goes into it too. It's like everybody, you know, 10 times more investors like something after it doubles, you know. So, it's just part of the the crowd the the crowd methodology with all of this stuff, you know. The prices the prices lead the narrative, you know. So, >> insane. >> Yeah. But I it it's interesting. I actually You're a You're a baseball fan, aren't you, Jake? You >> I am to put it mildly. >> Yeah. Yeah. >> So, I got I got a statistic to throw at you. I want to see if you if you know this one. >> So, who holds the record for the highest batting average in a single season in professional baseball? >> Oh boy. >> And you don't have to answer that question. >> It's probably something from like, you know, 1897 or something and a guy went two for two in a season or something insane. Well, no, that this is like based on a certain amount of at bats, but I think most people most people would say like Tony Gwyn, uh, you know, I think he had a pretty good season in the 90s and >> Ted Williams was the last one to hit 400, right? So, that's like the last benchmark. >> He's up there, too. Well, you know, you would have never got this because I'm it's not exactly fair how I frame this up, but the guy that actually that the guy with the highest batting average, his name's Gary Reedus, and he did it in 1978 for the Billings Mustangs, a minor league team. Oh, okay. [laughter] Cheater. And what'd he hit? >> He hit 462. And uh you know what was interesting about that is I was looking at at some of the stats around him. You know, that was 1978. Hit 462. He was paid $12,000, you know, and that was less than what Ted Williams made in 1941 for for hitting 400, you know. I think Ted Williams made 20,000. Um, and I looked at what the >> what the uh the fan attendance was of the Billing Mustangs in 1978 and it was like 300 people or something. So, it was, you know, it was only like his close family and friends coming out and watching and and I I was I was thinking about that more. It is a it is almost exactly similar to micro cap investing, right? It's like you can you don't get much fanfare being a micro cap investor, you know, because you're matching smaller sums, but you can >> hit for hours and hit for slugging percentage >> and yeah, you might not be matching 10 billion in micro cap and get paid one and 20 on it and, you know, create that type of lifestyle for yourself. But you can do really, really well for yourself, your family, you know, in the micro cap space. you know, you might not get the fan fair. You might only have 400 people or 200 people in the stands, but uh but that's it's kind of comparable to what I think to to trying to hit in micro cap, you know. [laughter] >> I like that idea. >> Is the the pitching soft relative to the >> pros softball? Yeah. [laughter] >> Okay. >> Did he get did he get the call up after that season? >> I think he did go up for a year or two. >> Tough game. >> I need to dig a little bit more into that. >> Hit 130. >> Yeah. Uh you had some you had some comments about art of execution. Do you want to take us through the art of execution? >> Yeah. Yeah. I mean what >> what's the book? >> I've been reading rereading uh the book art of execution which was written by a portfolio manager named u Lee Freeman Shore. And the book was written, I don't know, maybe back in 2017 or 2016, almost 10 years ago. But it was really interesting because he invested over a billion dollars with the world's top fund managers. I think he he invested with 45 of them and they were, you know, some of them were billionaires, you know, a lot of them on TV. Uh, and he gave each one of them between 10 and $50 million. And what he told them was they could only invest in their best 10 ideas. So 10 ideas only. And then over a period of several years, he kind of tracked their decision-m and um I think that was I think a total of 1,800 or so total investments made across those managers over that duration or a period of time. And he he wrote this book on on what he found out about it. And one of the key things he found out was when he analyzed the data, you know, the best stock pickers, fund managers in the world investing their top 10 ideas, only 49% were winning stocks. So basically, you know, these these great stock figures, it was a flip of a coin whether that stock would actually go up or down. And what was also interesting was the best performing fund manager that he was with, he was ranked three out of 10 times. So even you know less than the average and uh >> it's like a VC type distribution. >> Yeah, it feels like that. And it's >> and it's interesting too because I think if you would ask this question to stock pickers or fund managers, you know, what's your hit rate? >> You know, I think most people they're going to say 60%. You know, they're not going to say 40 because it sounds like you're a because you were late to write four out of 10 times, right? You're a professional. You're getting paid to do this. >> Yeah. And they're and they're not going to say 80 because that sounds like you're just being overconfident, you know, and so everybody just kind of falls in the middle. >> It depends on how attractive the person is that you're you're telling the [laughter] story to, >> right? >> You know, so nobody says like 40 or 50% because it just nobody wants to admit that it's a coin flip. At least be right or wrong. Yeah. And so that was kind of one of the first points he made. But it also kind it also proved that you the money is made after the decision, you know, and the money is made on how you react to when stocks are winning or losing, you know, if half the time they're winning or losing. And what he ended up doing was he put in the book he describes, you know, these different tribes. Um, and you know, people that the people that were in the tribe of winning, he put like he called them rabbits, assassins, or hunters. He put them in these three categories, kind of like psychological tribes that you're in with your winning. And so if you're winning and you're a rabbit, I'm sorry, I'm going to reframe this. Let's get let's go through the losing first. So the three categories of losing are rabbit, assassin, hunter. So if you're a rabbit, he said this is the most dangerous category because when a stock drops, you know, the rabbit freezes and it's like a creature in headlights and they don't do anything. You know, stocks down 30 40%. They don't do anything. >> Shell shocked. >> Yeah. Exactly. Um, and they forget that, you know, a stock that goes down 50% has to go up 100% to get back to break even, let alone something that goes down 90%, you know, has to go up 900%, you know, to break even. And so they they find them rabbits find themselves in holes, hence the name rabbit, you know. So that's that's one category of, you know, psychological behavior that that he witnessed. And he said the assassins and most of the investors that he invested in he would say were assassins. They were traders. They had no emotional attachment to the companies. And so if a stock dropped 20 30 40% they were quick to kill the position, just sell it. And he was saying this was a good attribute to have because you were kind of limiting the damage, limiting the downside risk. Um and then the third one is Hunter. And he and this is the rarest breed. I think it was like 1 or 2% of the managers fell into this category and they actually were the ones that required kind of a strong constitution and the ability to double down you know when the when the business was fine but the stock was just dropping and you know one of the main takeaways was was obviously that you know you need to be kind of a mixture of assassin and and hunter in this regard. Um, so anyway, I was just rereading that that was a three and so the two >> just before you move on from that it's it's kind of a it's that's not what I would have expected. Uh, because I think that most people double down, don't they? Do most most people keep on buying all the way down? Do you think that's wrong? I mean, is that characterization wrong? Do you think most people keep on buying on the way down? >> Um, it's a good question. I I do think that it's more prevalent. You know, people that just average down just because a stock is down, not realizing that probably 80% of the time a stock's dropping, especially if it's not macro related, it's probably because the business is deteriorating cuz of those three options. So, you can buy some more, you can ignore it and hope it recovers and just let it go to zero if it doesn't or cut the position. I would have said cut the position is probably the you know I guess it depends on the circumstances but cut the position without knowing anything else that's probably the worst decision. >> Yeah, >> do nothing is probably the neutral position and buying a little bit more is probably the better decision given that you've you've done this work, you've done some diligence, you know something about this stock, >> the stock price can fall in a quarter 50% and nothing much has changed. >> And I would have thought that blindly buying a little bit more would have been a that would have been the thing that most people do anyway and that would have been probably the better thing to do. But I don't know that's an interesting finding. >> Well, the >> were there were there any commonalities of when you doubled down and it worked? >> Well, I think he teased out of that. >> He pulls in the hunter thread a little bit more. He he talks about how it's not just blindly averaging down. You know, these are, you know, they they were strictly tracking the business. They believe the business trajectory was the same, if not better, than it was before. You know, so it's not just blind. You're not buying it more because it just dropped. >> It's hard to tell quarter to quarter, right? >> It is. No, it is. Like I said, these are just broad categories, Toby. I didn't write the >> Don't overthink it, buddy. >> That's That's what a podcast is for. Let's talk about it. I got I got one of the world's cap investors here. I'm going to ask you. >> Got time to kill. Well, I do think that, you know, kind of a segue from this is I do think a lot of the problems with lose, you know, when you're losing in a position, it's usually a product of bad position sizing at the onset, I find. >> Um, but if you just assume a random walk for every position that you put on, >> there's no the market doesn't know that you've bought it as much as you would like the market to know and immediately turn around and start going up. I mean the reality is that most of the time you're buying them because there's some dislocation between price and valuation. So >> as Einhorn points out on the on the short side, you know, if it's half price, then one/ird price is no less irrational than half price or 2/3 price or whatever it might be. >> Y >> So I just I don't know. It's I think it's a funny finding. I'm just kind of interested. >> Yeah. I have a a friend who um quite clever in he has a rule that if any position that's down 20%. Automatically triggers a review and he has to decide either you cut it or you add to it but you can't just sit there. So you're kind of forcing to either be >> an assassin or a hunter. But you can't be a rabbit. >> 20 is pretty r 20 is not much of a move though. Like that's that's that could be noise at 20. 50 is more of a move. A third is more of a move, especially at micro cap. So, it's probably more relevant. Two days. Exactly. [laughter] >> He traffs in some bigger names. So, that's probably maybe answer some of your your question. [laughter] >> Fair enough. Fair enough. >> Seems like a good rule, though. I mean, at least >> can't sit there and suck your thumb. >> Yeah. And and I think the book is interesting just because it does divide it up into these categories and makes you self-reflect a little bit about where you are, what you kind of overemphasize or where your mistakes are and and why >> about on the winner side of naming these guys and what >> and why a tool like journalic is a good idea. So sorry. >> Oh, good idea. >> It reminds me a little bit of that, you know, John Hemp, who's the Aussie fund manager who does a lot of shorting. He had a he had probably the best post that I've ever seen on it where he talked about doubling down or or the conditions that you need to increase the position size. And we had a guest on I forget who it was but over the last month or so who was talking about I think it's an old joke where you know people have lost like 25% of the portfolio in one you know 8% position or something like that just because they keep on doubling down >> when it goes down. I don't know if there's any right answer. It's one of those you only find out if you're right. >> Yeah after the fact. Yeah. >> Yeah. I know. It It's definitely something I do feel like averaging down for a micro cap investor is probably one of the biggest mistakes. >> Um >> because there's no flaw because it's so easy for them just to disappear. >> Yeah. And Yes. Yeah. And and and I think the the only time you really want to and again you're always going to have a day or the or week or month where you know it just gets pulled down randomly for some random reason but I'm talking about you know one year, two year, three years you keep averaging down into something you know not not three weeks in a row. Uh you know I do think that's where a lot of the biggest mistakes are made. >> You know when you've kind of just lost track with all of reality you know that you're just trying to prove the market wrong you know by continuing to bury yourself in a position. But I feel like that that behavior is much more common or or ignoring the position is much more common than someone who cuts the position who just gets frightened out immediately. I don't know. Maybe that's >> Yeah. >> Maybe you want to be right more than >> for sure. >> Care about making money, right? >> For sure. I mean, it makes >> you're teeing up the veggies really well right now. By the way, >> that you know that Bessim Binda Besser study which I don't know I I've seen some criticism of I haven't fully internalized it, but and I don't really understand his study either, but he says that like basically most companies go to zero and I think that he's an advocate for therefore investing in the index which is always like in the biggest in whatever's working at the time. But that would seem to be the case like if if that is in fact true and most companies go to zero and you start losing in a position then cutting it is the is the more sensible position. But then if you talk to someone like >> bad news for you Toby on a long enough time horizon they all go to zero. Wow. That's probably >> that's what I was going to say, >> especially since 1926 or whatever that >> Yeah. when it started. >> Yeah. >> But then if you talk to someone like, you know, Buffett or lots of lots of value investors, they would say that a big chunk of their return comes from trading around positions, like trimming them when they go up too much and and buying some more when they go down. >> Yeah, I'm I'm a fan of that approach. I mean I I think especially for you know high conviction long only investors and small caps or whatever. I mean you do build up this knowledge level of a business and you almost feel like you have a sense of the pulse on the company and the stock after a while. >> Um and I and I think you yeah over a 10-year period there's no reason you can't make a lot of money from the same stock and doesn't mean you the whole time. >> And if you know it really well and it's down more it's just >> yogen. What about on the long >> one of the ironies of of that with you have a very volatile even the business results if you know that they're not maybe they're a little bit more cyclical or I think this is a good example of like Fairfax versus Bergkshire like Bergkshire is a better business on almost every criteria that you could imagine but the price doesn't really dislocate because it's so steady and so actually chances to make more money on Fairfax over the years actually than Bergkshire because of that, you know, the results weren't as good, the market overreacts, you can take advantage of it, then maybe you sell into an overreaction the other direction. It's there's some it's it's one of those things. It's like, oh, do you want the the lumpy 15 or the smooth 12 kind of thing that Buffett's talked about? >> Yeah, I think we we need we need to close it off on the long side, too, because we haven't we haven't discussed the long side. >> Yes. Yes. Sorry. >> The winners. >> Oh, yes. The winners. So, there there was two >> Let's win. >> Yeah. There's two tribes on the winning side. The one was called Raiders. And you know, basically Raiders are the people that just sell their position very quickly after a 10 or 20% gain, you know, and I think a m a majority of the folks that he invested in, not a majority, but a decent percentage were he would coin as these raiders. Like they never let winners run. Uh they were they were quick to take the easy 10 or 20%. >> The other side >> and those that's the more favorable side. That's the >> No, no, no. That's that's a bad side. >> Yeah. Okay. Uh The more favorable side is the connoisseurs and these are the folks that you know develop deep conviction. [clears throat] They love they were very boring individuals because they're always in the same stocks you know and they were able to hold on to things for you know thousand% plus returns over time >> and that's really where the the real money was made. His his argument against the raider mentality is you just don't make enough money to make up for the losses you take along the way when you're only getting 10 or 20% here and there. I think that's one of the things that I noticed when I test. You know, Graham's got the net net rule where he talks about you sell after two years or a 50% gain. And the 50% gain definitely hurts returns because >> that that particular group of companies are characterized by Yeah. But >> lots of them don't work. Like that's a really good example of a lot of them don't work, but you get a handful of big winners and you need the winners to >> 10 or 20x to pay for the rest of the portfolio. That's not really working. Yeah. >> Yeah. >> I think friend of the show uh Kevin Zatlucl wrote a paper on this that the it's kind of a horseshoe looking shape of you have like VC on one side that's very power law driven you know a few of the startups make all the money and then actually your outcomes on like deep value bucket is also like that very power law like there's just a couple names in the portfolio that drive all the outperformance and the rest are kind of like duds or or you know break even which you would think these things are like so opposite of each other and yet uh they have the same characteristic of kind of return profiles. >> Yeah. >> Yeah. Uh so his main kind of takeaway was just that all the successful managers they they let you know that they have a philosophy around letting winners run, you know, and and I think one of the other takeaways and I've written about this before is you know I'm okay trimming. I trim stocks all the time, you know, but don't I I kind of have a firm fast rule is yes, I I do sell when things get overvalued and and sell a decent chunk of something, but I try not to sell all of it >> because usually, you know, you'll miss out on Yeah. the 5% that actually that right tail continues, you know. So, yeah, I think it's good. I think it's okay to trim. Just don't sell all the winners. >> I've done tests where I just turn off my cell rules and just hold them forever. And one of the problems that you get with that is you get to the end and you have a handful and it's not so much a problem because we're always the study finishes in the present day and whatever is working in the present day is a big chunk of the portfolio. But then you have this question right at that point. Well, now I've got something that's 15% of the portfolio that's up. >> I thought it was more in a lot of them. There was like >> Yeah. across the entire portfolio. Like 15 I think is about the biggest I've ever seen starting at like a pretty small like that's starting at a one or two or 3% position. >> Okay. >> And but but even 15 like you've got a decision at that point. Do you want to go forward with a 15% position or >> trim that one back or what are you doing? So now you're really beholden to whatever that big position does. >> And that's something that's right at the end of it's had a really great run. like everything's worked and the multiples way up and everybody loves it and you look like a genius because it's the biggest thing in your portfolio, >> but now you got to make a decision. >> Now you you got rich. Do you want to stay rich? >> And the other side is funny too because it's always it's it's looks to me like it's completely random. I go through the portfolios when they're bought and I'm like, well, you know, I like these ones cuz they're names that I recognize and it's some of the stuff I've just never heard of before and it's the stuff I've never heard of before that's like a 15 or 20x over 20 years. >> Yeah. Well, I mean to that point, Toby, to to what you're mentioning, I I think a way an area that I've definitely evolved is this belief that, you know, high conviction means high concentration, which means high at cost positions, you know, and and and I I now I tend to take kind of smaller at cost positions, you know, especially in micro cap where it's probably good anyway to to see the management team can execute, you know, for a few more quarters. Uh because you know the the main difference between me cap and large caps is just the shelf lives are shorter. The moves can be more fleeting. They can last they're usually two to four to six quarters. You know it's not 10 years. You know we all want it to be 10 years but that's just not reality. You try to live in reality not what you hope the world would be that you could coffee can these things. Um, and so you I've kind of reconstructed my beliefs around that and the number of positions and the at cost position sizing and things like that to reflect that. And I still love large positions, don't get me wrong, but I find that like the bigger the at cost position, the harder it is to do the right thing. And, you know, when it when I started it smaller, you know, and let the position earn its right to that larger position size, it's easier to sleep at night. Uh, and I would love to have a 20% position and and we have that. Earned the right to get there, but it wasn't from me >> trying to prove to the market it's wrong. >> Wasn't from you buying 25% position. >> Exactly. Yeah. Yeah. 100%. Yeah. Because it's always it's always those smaller positions, ones that uh that do better than the largest highest conviction one when you form it at cost because it's the one that you like it hit all the big boxes and you don't follow it quite as closely. You don't emotionally think about it so often. You give it the the time and the room it needs to breathe in the portfolio. Not overanalyzing some Google alert you got on a random news event of a butterfly farting in China, you know? You know, it's like you're you're letting it just mature, you know? [laughter] So, it's easier to let them grow. >> I think we should I want to keep on talking about this, but let's do veggies and come back to conviction and concentration. JT? >> Yes, sir. So, we we're going to be talking about the four idols. Uh, and there's this this kind of strange thing about investing that we probably don't talk enough about. And, you know, on the surface, a lot of times it looks like math where it's discounted cash flows, expected returns, risk premium, etc., all very clean, all very rational. But anyone who's spent real time in markets like Ian has, they know that investing is is not just this kind of technical exercise. It's the psychological one. And even more than that, it can kind of be a moral one. And you know, markets don't just reveal information. They they kind of reveal us ourselves. And we can learn about ourselves a lot in markets. Uh often paying high tuition for that that self-nowledge. Uh and it's easy to forget that stocks, they don't care who owns them. And they they don't care how much you paid for them either. Uh and we can discover often what we fear, what we want, uh what we what we think will make us feel safe or important or complete. uh nearly 800 years ago, this guy Thomas Aquinus made an observation that that is still feels quite modern. And a little bit of background about old Tom there before we uh we get in because he was a bit of an interesting character. Uh he was born into a wealthy noble family in southern Italy and they expected him to become this powerful Benedicting abbott and essentially like kind of a feudal lord with you know spiritual overtones to it and instead he joined this other Dominican order which was this kind of new I think the term is mendicant um and they he committed to the basically like poverty studying and and preaching and his family was absolutely furious with him. At one point his brothers kidnapped him and imprisoned him for like a year attempting to force him coming to abandon the Dominicans and come back to to their side. Uh and you [clears throat] know he was famously this really like large and quiet and kind of socially awkward guy. And his fellow students nicknamed him the dumb ox because he spoke like so little in class. Uh, and one of the strangest facts about him was that near the end of his life, he he just abruptly stopped writing and he had this mystical experience during a mass in 1273 and he reportedly said that all that I've written seems like straw to me. Like he's just like, I'm I'm over it. Um, anyway, back to to Thomas. He he argued that that human dissatisfaction doesn't come primarily from hardship or scarcity, but from actually misdirected desires. So when people you know they take infinite they take finite things and then they ask them to deliver this infinite meaning to them and then they risk turning these things into idols and in kind of the religious sense. Um and he identified four idols specifically wealth, power, pleasure and honor. uh and each one promises some flavor of fulfillment to you and each one activates like real psychological reward systems inside your brain and then each one ultimately fails you uh if taken too far. So, uh modern writers like Arthur Brooks have have translated a lot of this into like more secular language for us. But um you know it is it is dopamine loops, it's it's h hadonic treadmills, status reinforcement, like all these things. uh and short-term happiness never quite becomes that lasting feeling of well-being that you're really chasing after. Um and these these idols show up in the investing world as well. So what I want to do for the rest of the segment is is walk through these four idols and not as this abstract philosophy but maybe as investor archetypes. Um and you you'll see these these idols manifest in others and and if you've been do investing long enough uh you might even recognize some of these in yourself. Uh so let's start with the first one which is money. uh not money as a tool or money as a means to live a good life, but money as as giving you meaning and as as the thing that will finally make everything feel okay for you. U Aquinus warned that wealth is uniquely deceptive because it looks infinitely expandable. There's always more to earn, more to optimize, more to protect. And unlike food and shelter, wealth never really tells you when you're done. There's no like real satiation to achieve potentially. So in modern markets, best idol produces what maybe we'll call like the accumulator. And that's someone who they're investing primarily as a mechanism for maximizing net worth. You know, portfolio size becomes the scoreboard. Their conversations are around net worth. It's really stripped of any reference as to what the the meaning what's the meaning of the money for them. What can you actually do with it in the real world? Uh and and this they w they like watching the numbers go up because it feels like progress, like competence, uh like armor against uncertainty. And of course, you know, saving money is all to the good. I would never argue against that. Uh but you know, there's a trap there that once kind of basic comforts are met, that additional wealth doesn't produce the emotional returns that you would want. Uh and it's it's kind of this especially if you have this the hole in your soul that you can't fill like money's not going to do it. So if [cough and clears throat] uh let's jump to the next one, which is power as the idol. And this is a desire to command outcomes to impose order to eliminate randomness. And for Aquinus, power temps because it offers this illusion of of self-sufficiency. Uh and if if your control of everything is total, then you're like you have no vulnerability. So in markets, this might be called like the controller we'll use as a generic term. And uh it's primarily focused on returns in isolation and focused on it's not necessarily returns, it's about having the the agency, right? uh influence shaping events rather than just participating in them. So the archetype is probably activist investors pressuring management or maybe even like macro traders who you know they're trying to outguess central bank pronouncements and you feel like you have this control over the system because you understand it. Uh and action itself becomes this psychologically rewarding sense of urgency. Um and so [clears throat] you want to feel smart and decisive and relevant. But markets are are nonlinear. They're they're not mechanical. They're complex adaptive systems. Control over any complex adaptive system is is elucery. And this dissatisfaction loop appears where reality just doesn't comply with what you want it to do. Uh it could be incredibly frustrating. Uh and each failure then demands more intervention, more leverage, more complexity, more more confidence in the whole scheme and eventually you know market enforces that humility sometimes violently. uh and and then you're basically your pursuit of power will collapse under randomness eventually. So third idol pleasure Aquinus understood that that pleasure is inherently transient. It exists only in the moment. It can't be stored. Uh it demands constant novelty as well. So in markets this might be called the speculator. Uh and you're treating investing as a as sim as stimulation really. Um you know volatility isn't risk. gets sort of the whole point like I want I want action options, crypto cycles, meme stocks, you know, rapidly shifting strategies. You need that action and it's rooting, you know, maybe even today now it's rooting for that team to go for two to cover the spread. Uh it's I think we're living in a world where the the the speculator is is having their moment. Um but the the objective isn't long-term business ownership. It it's it's an emotional engagement. The payoffs are usually need to be immediate to hit that dopamine. Um, and losses, you know, at least you got it got your pulse up. U, and of course, social media is terrible for amplifying all of this. Uh, even your near misses kind of reinforce bad behavior of like, well, I almost won. I better get back in there and double down. U, [clears throat] but of course, you know, like pleasure has a short halflife. Yesterday's thrill becomes today's baseline. And to feel that same intensity of the the feeling, the stakes have to increase the frequency, the leverage. Like, you can't just sort of like stay in place there. There's that hydonic treadmill again. So when [clears throat] often what starts as excitement ends in exhaustion and ruin. All right, last one. Idol. Uh the fourth idol is honor and not the way that we sort of think of it as you know today we might call uh like you know oh this is an honorable person. This is more like fame, prestige, recognition, people thinking that you're smart. And Aquinus warned that honor in this context is is uniquely unstable because it depends on other people's opinions of you. It's not about yourself. So they can grant it or withdraw it from you at their whim, not at your consent. And this idol might be we might call like the narrator. U and they invest not just for returns but for recognition. Like you want to be right and that matters a lot more than even the financial game. You want to prove everybody else wrong. You know, visibility becomes the currency. Platforms, you know, Twitter, podcasts, conferences. You want to turn investment views into this public scorecard that you has this this psychological payoff of social validation with followers and likes and invitations and all this stuff. Michael Lewis writing your story up. But, you know, and and it feels good to get things correct and have the proof of it and to show off to the world, but you know, markets are cyclical. reputations can be fragile to these things. That that dissatisfaction loop that comes from it um you know when the performance diverges from the narrative, these public positions then become identity traps and you fall prey to them in this commitment consistency bias way and now updating beliefs feels like you're waffling or some kind of self- betrayal and like no one wants that feeling. So honor pursued too far as an idol converts investing into almost this theater of you showing off. um you know, maybe even when it's at its worst, you're you're pulling TikTok names out of a scrabble bag. Uh but the portfolio becomes secondary to this persona. And so to be clear, you know, none of these idols are inherently evil. Money is useful. Power can catalyze change. Pleasure is part of life. Honor can reflect real contribution. The problem is is not their presence. It's their elevation above everything. It's when they get taken too far. And markets are very expensive mirrors to discover yourself. But and and eventually though they do provide an accurate reflection. So the danger I'm going to give like what uh these idols a little tip for everybody to wrap things up to make this a little bit more practical. Before you place the next trade, ask yourself this rude little diagnostic question. Which of Aquinus's idols might I be feeding right now? So more specifically like is it money? If I doubled my net worth today, what would I stop doing? And why haven't I stopped already? Uh, and can I practice stewardship instead of hoarding? Is it power? Where am I confusing activity with control? Instead of like practice humility instead, build a process that expects randomness and can survive being wrong on occasion. Is it pleasure? Which investments are actually just entertainment with a ticker? You know, instead practice temperance. If you want entertainment, you know, buy it honestly. Like, don't disguise it as investing. And then lastly, is it honor? Where am I defending a story because it's mine, not because it's actually true? Instead, practice integrity. Follow your own inner scorecard and let let being right be incidental part of it and not this metaphorical hill that you're willing to die on. >> The end. >> Brilliant. JT, >> great job. >> Harsh, brutal. Yeah, >> Thomas Aquinus was brought the uh the brilliance. I just recycled it. >> All in there a little bit. >> Yeah. No, we all have it. It's just how much do you let it out of the let the beast out of the cage. >> That's a good that's a good reminder. >> So I think I think we probably all suffer from all of those in varying degrees, right? >> Yes. >> Guilty. [laughter] >> Yeah. So I guess what >> you were saying on the accumulator side, you know, your you your last points there were about how do you not contradict those those things, but maybe how to counterbalance them if you do suffer from them in varying degrees. And so if you're an accumulator, maybe the the way to do it is through stewardship or tithing or whatever where you know, yes, I'm getting wealthier, but the same percentage is going to the church or whatever you believe, you know. So at least have it be for >> at the very least at least a good cause is benefiting by your wealth [laughter] >> to counterbalance. >> Yeah. Not just for more. >> Yeah. Yeah. That was good stuff. Um let's let me do an ugly segue. I get I get in trouble for segueing away from you too quickly, JT with that. But sometimes I'm I'm I'm as overwhelmed as everybody else. I'm processing and and uh I'm processing that one. So uh if you've got great questions for JT, stick them in the thing. I'll ask him. But uh we're going to have a quick chat about >> he won't answer. >> I'll ask um let's go back to con I think that we've we've we've got this the same theme for the whole thing today really. But back to that concentration versus conviction question which I think is is sometimes it's a little bit hard to discuss in the abstract because we probably need to know the circumstances of every position to to to talk about it. I do think it's an interesting um topic of discussion because it's [snorts] uh >> Can I ask can I ask Ian a question on this specifically? >> Please just put me out of my misery. >> Yeah. a hypothesis that I I have is that there's some kind of curve of of marginal utility on research that once you get over you're you it starts to flatten out and there's a certain point where you're adding to your budget of time of like learning a company and you're adding to your conviction and maybe you're even adding to the position because you're like oh I know this cold right like I know this better than anybody I've done so much work on it and you're adding that confidence that conviction, but your confidence is probably growing at a slower rate than your your confidence is. And so, you're going to end up like sort of offkilter from do you really know it as well as you think you do? And is there some sweet spot on the curve there where you're like, I should probably just shut it down here because otherwise I'm getting over my skis on on research and I'm just going to add to my overconfidence and not my competence. >> No, I I think you're exactly right. I mean, I think there's and a lot of the research, at least what I found is a lot of the researching can only happen there's only so much upfront work you can do, you know, and I feel like you can overdo it on the upfront side, especially with kind of micro caps that tend to be simpler businesses and and kind of value propositions, you know, to where a lot of times for me at least since I'm a hightouch kind of management focused investor, you know, the a lot of the research happens after, you know, at least the initial purchase. you know, and and it just changes things. When >> management knows you own the stock, it changes the conversation. And it's about accumulating more and more knowledge over time, not necessarily forcing the accumulation of knowledge. Uh, one of my mentors in the business was a full-time private investor, and he built a portfolio of a few hundred thousand up to about a hundred million investing in micro caps um over a course of 25 or 30 years. And just a cool cool guy. And you know, he was just telling me last time we chatted about when one of his positions he's owned for five or six years and he probably still spends 2 hours a week on diligence on that name even though he's been in it that long >> of a position. So, it's just that constant accumulation of knowledge and I think if we were going to have Jason Hirschman on here, you know, who we all because he's been on this program before and you know, everyone knows that he's been an expel for a long time, you know, and I think he would probably say the same thing like it's even though he probably knows that story cold, you know, he's still continuing to do due diligence on it, keep up to date with the different forces or, you know, tailwinds or headwinds, whatever it's facing, geopolitical ones. whether it's in China or here or whatever, you know, I don't think it ever stops. But I I do think it gets back to position sizing, too. There is a limit to how much you can do up front. And for me, in the way I invest, like if if it's not painfully obvious after a day of research, you know, it's a pass, >> you know, if I have to pull out the 12, >> you're talking yourself into something, right? >> Yeah. something's wrong, you know, and and that's more that's it's not that's maybe different for everybody, you know, but I'm, you know, I'm looking for things that can hopefully two or 3x over a threeyear period. I'm not looking for, you know, a 12.1% return per year, you know, so it's a different >> You say that you would only suggest that though if if you're have 20 years in the business because you've seen the patterns now and so it's like if it doesn't jump out to you immediately, it probably won't. Whereas if you're newer, you might not have that pattern match yet. >> Yeah. No, absolutely. That's where the pattern recognition, you know, comes into play over a couple of decades. You know, you get to you get to you're actually able to react quicker. >> I think >> and I think I think it also allows you to to hold more positions as well versus, you know, when I was in my 20s, I would hold three or four positions. >> You in my 30s, it was 5 to seven, you know, and now it's 10 to 15. Um, and I feel like I can get the same absolute return out of a portfolio with less risk, you know, with 10 to 15 than I did even with four or five. >> And I think it's a lot of that's just pattern recognition, the ability to >> to see these things. You know, you're kind of an art collector that's looking for the next Monae or Picasso and there's only one or two that come up per year and you just kind of wait for when they come up for sale or whatever it is or some emerging artist. It's kind of the same thing. I think about it sometimes in terms of the you know that simple algorithms beat expert investors or experts because once you get past six or seven important pieces of information then the sort of the materiality of each additional piece of information is less and I would like the the analogy that I would give is of if you have a sector specialist who knows everything in oil and gas or whatever the case may be >> but oil and gas is really expensive then their best position or their best idea in that is not going to be as good as somebody who's got less understanding, but is looking at least at another industry that's all beaten up and as close to, you know, is bombed out. If they're looking in there, then it's probably more likely that there's a better position in the beaten up sector than there is in the thing that's at at all-time highs. then you might be better off taking some of that research away from the thing that's already working and is a big part of your portfolio and spend it looking at something you don't understand or an area you don't know about because there might be something there. >> Yeah, it's and it's yeah, it's an opportunity to expand your circle of competence that way because I do think it's actually easier to find outlier management teams in beaten up industries. You know, when when you see an industry facing headwinds and there's a company or two that are still growing in that environment, >> they're obviously taking share >> and you can look at their behavior. >> That's when the Spidey sense goes off like they're obviously doing something different, you know, and then you can dive in. We've done a lot of that in this micro cap side, you know, first with resources and oil and gas over the last few years trying to find it's actually easier to find the great leaders in these small companies in that market environment versus when everything's zooming down. >> Yeah, >> there's a good question here. What do you think about Phil Fish's take on concentration? It depends on how diversified are the sources of revenue of the company, different customer bases, products, geographies. I think that's a good I think you could just broaden it out to say um >> it's something that we were talking about before like how >> the the how certain are you of the outcome >> or what is the downside the range of possibilities look like including the downside for as a as a con as a sizing conviction like using Kelly or something like that. How do you think about that Ian? Well, I I think each position is different, you know, and I think it's it is important to look at every individual position through the lens of what's the upside downside ratio and then, you know, produce your position size based off that. Like each one of the companies I have has a different downside and a different upside and obviously not all of the all the risk is knowable, but you know, I think a decent chunk of it is or at least you could imagine it. And especially the good thing about micro or the bad thing about micro caps is they all have 50% downside. It doesn't matter. So that's the starting point. [laughter] >> You don't even have to. >> So when you're developing >> Yeah. There's none of this. >> Yeah. They can all go down 50 or 70%. >> That's the bit ass. [laughter] >> But I think I think it does start there. And you know the because I've invested so long, I don't have a single kind of flavor of investing that I would or I'm not a single flavor of investor. You know, I have I have some story stocks in my portfolio, god forbid, that have no revenue, no earnings. I have growth stocks that have some revenue and no earnings. I have GARP stocks that have revenue and earnings. And I have some deep value stocks. And I have, you know, a gold stock beside a med medical technology company, you know, and each one of those flavors of business and industries has its own unique set of risks in the business andor around the business. Uh, and just trying to figure out, okay, you know, this is a story stock. I think the upside is 10x. I think the down or upside is 10x. I think the downside is 80%. Um, you know, how do you put this position on? And I can have high conviction in that story stock the same as I can have high conviction in a deep value name trade at half a book value. But the initial position sizing will be different because of that that risk is different between those two simply because of the fundamentals of the of the company. And the the common denominator amongst the companies I invest in is at least I perceive that they have very good management. you know that that is the common denominator amongst those industries or flavors or whatever you want to call it and that's the first thing I look for and what attracts me you know to an investment is is the people I'm pretty agnostic to the to the industry >> has uh AI proven helpful yet on management assessment >> um I do I think it's help helps dig a little better you know in some of the some of the people so yeah I mean it's definitely a an amazing tool Yeah, we see the bad effects on Micro Cap Club, but you know, I think 80% of the applications are AI generated and it's and it's obvious and that's the that's the most annoying thing. I was like, at least don't make it obvious, you know. >> Have you seen the uh output of writeups in micro cap as the cost of producing a writeup now you could just like put a ticker in and kind of kick off a script and it'll go put an okay report together. Have you seen a proliferation? No, I mean we see a lot of AI generated writeups and we flag them, you know, and I think that I think it's great to use it as part of the write up, but I think you still need to add your narrative, you know, to it and add some differential insights to whatever that AI generated thing, you know, popped out at you. >> Yeah. Uh because even you know when I use Gemini deep research deep research or whatever you'll still find errors all over the place you know where it just gets stuff completely wrong. >> Um and so you have to verify >> but it's so confident when it says it. >> I know it is. It's it's very commanding. Yeah. [laughter] >> And then when you point out that it's wrong it just it apologizes so quickly and just moves on. [laughter] >> Uh does does AMC did does AMC still own the gold mine? Did they buy a gold mine? Was it producing? Do you guys follow that at all? >> I I vaguely remember that happening. I'm not sure that's >> Is it still >> You said one of your positions you said was like a medical equipment with a gold mine inside it. >> No, no. I was just saying that I have >> I have a gold I have portfolio. Yeah. Different types of gold exposure in the portfolio, but no, not a medical technology with a gold mine in it. That would be >> I was just wondering if AMC's participated in this in this run if it's come back because of the gold because of the gold mine. >> We're go we're going back to 1980s conglomerates where like no businesses that made no sense to bring together all brought together. [laughter] >> Yeah. How long till we get the uh like a gold treasury company instead of you know Bitcoin treasury? >> Getting closer. Micro kept treasury company. [laughter] I don't even want to know how much the investment banks made in 2025 and all the money they raised for those crypto depository companies and and whatnot. It's it's probably revolting to know. [laughter] >> So, they're down a little bit too. A few of them I've had a look recently. >> Yeah. >> Oh, they s AMC did it, but they sold it. Thank you. Thank you, John. Uh they let me know. There was another good question. >> We don't need AI. We have the hive mind. >> Toby, what's what's cheap right now? Like what's >> gas? I was going to say oil gas, right? >> You have to you have to there's a there's a glut the size of the 2020 glut, you know, not quite, but there's a there's a lot of oil around, but um everything's cheap. The multiples are down. So, and it's it's had, you know, the who knows what the commodity does, but the commodities lots of commodities have run. So I think energy is kind of interesting here. Everything else has um had a little run. I think probably some banks are interesting. Some insurers are interesting. Yeah. But I think oil and gas is dominant and I think some of the consumerf facing um retail well or a lot of retail is consumerf facing but I think the consumer has been pretty beaten up over the last three or four years and so consumer retail is bombed out. >> Toby, when are the all those SAS darlings going to fall into your screen? That's what I want to know. They're a long way off, but um I I [laughter] look I'd love for something to const like Constellation to come in. Constellation's off 50% got a you know 6% free cash flow yield on the screen and I I hear that it's a little bit higher than that in actuality. So constellation CSU at some point pretty good compound although I guess you got to deal with >> Leonard stepping back and a pivot in their strategy away from VMS into whatever they're going to I don't know a lot about it, but it's it's one of the I think it's interesting just off the top of my head. That's not that's not an investment advice either, folks. >> Yeah. Not not advice. I think it went from 60 to 25 times. So, it feels cheap, but it's not as cheap as it feels. >> But it's never really got cheap. If you look back, it's never really had a big draw down. It's never really got very cheap. >> I know. It's always lived at 40 plus neighborhoods. >> But then it might be it might be a different business going forward. So, it's hard to and it's I guess it's the opposite of the AI trade at the moment. It's the other side might be the but then I don't I don't [snorts] know. I'm inclined to think that they kind of muddle their way through and do all right. But that's uh that's time amigos. Ian uh if folks want to follow along with follow along with what you're doing or get in contact with you, what's the best way of doing that? >> Uh you can follow me on X, it's my name, Ian Castle. You can uh find me on micro cap club, you know, talking about stocks and, you know, it's it's a great resource if you're passionate about microcap investing to find new ideas and and network with with investors from around the world. And if you want to get meet up in person, you know, come to the events, planetmicap.com. >> William, thank you for being one of the true good guys in this industry. You're one you're one of my favorites, so I appreciate you. >> Thanks, Jake. Appreciate it. Second. Um, thanks folks. Uh,