“All failed companies are the same: they failed to escape competition” ~ Peter Thiel
To Peter Thiel, noted venture capital and co-founder of PayPal and Palantir, the less competition, the better. Most investors would likely agree with this sentiment. The best companies operate in inefficient niches with high barriers to entry, limited competition, and preferably incompetent competitors.
The irony is that many investors, themselves, do not follow these beliefs. Large cap investors face incredible competition – hedge funds, sell-side analysts, high-frequency traders – all vying for the same small amount of alpha. The individual investor is simply at a stark disadvantage to these high-powered institutions.
What if we told you that there was a niche of the market, unexplored – in fact, incapable of being explored by these big-name institutions – where there are no multi-billion-dollar hedge funds and where, by definition, every successful investor eventually leaves?
Our focus and our lifeblood is investing in microcaps, why microcaps: companies with market caps under $300 million. This allows us to do the opposite of what the “Wall Street crowd” is doing. We firmly believe that interest in the microcap space will pick up significantly as a result of the recent volatility we are seeing in the broader markets. While the media tells investors to fear smaller companies, we make examining them easy, monitoring clues like insider buying and company share structures to help weed out the quality names from the bad actors.
Microcaps can give investors many of the same competitive advantages that make companies great. In a 2017 ValueWalk article, GeoInvesting founder Maj Soueidan outlines the main structural advantages of microcaps. We encourage you to read the article for more specific advantages of the space, but here is the system at play in a nutshell:
Multi-billion dollar institutions face many barriers to entry to investing in microcaps, because they simply have too much capital to build meaningful positions in microcap companies. Further, the negative stigma surrounding “penny stocks” causes even many qualified investors to ignore the space.
Much like with large moat companies, these barriers to entry insulate microcaps from the typical market gyrations. In a bear market, all large caps tend to fall in tandem because large funds and ETFs dump their holdings indiscriminately alongside redemptions; microcaps don’t face the same risks because they don’t have any of these funds invested in them.
This then leads to limited competition, which allows smart individual investors to dominate the niche, and gives them unique resources, such as the ability to interview management teams, attend conferences, etc. In a given year, there are over a dozen high quality microcap conferences to attend, for investors to network, interview management teams, and identify great investments.
Less competition also contributes to a first mover advantage, we know as investors why microcaps can essentially front-run institutions. We invest in the next great companies. In Geo’s experience, we usually end up selling our fully-grown multi-baggers to incoming “big money”, which aggressively bids prices upwards once a stock grows to their size requirement.
Limited competition also creates more inefficiency (and correspondingly more return potential), simply because there aren’t high-powered institutions trying to value every stock down to the penny. This paper by O’Shaughnessy Asset Management outlines the dynamic by which lack of institutional participation contributes to inefficiencies in the microcap space.
Lastly, it logically follows that the best investors in the space generate such high returns that they inevitably grow to become too big for the niche, leading to (generally) less competent competition in the space.
These competitive advantages are the exact traits that have created the biggest company success stories ever. Most small individual investors would love to find these traits in a stock at a reasonable valuation, but likely don’t realize that the ability for them to compete in a space with the dynamics described above is readily available in microcaps.
There is opportunity here not only for achieving great returns, but also for learning, collaborating, and experiencing the industry. The good thing is that you can still use microcap “hunting” strategies to quickly identify opportunities in big cap stocks when they arise.
I am a relatively new member. I am really enjoying the service. Even more importantly, I am learning a lot. I like the GeoInvesting approach, where you guys just demonstrate your trades, rather than providing buy/sell recommendations. This is great because this allows the subscriber to proceed and do his/her own research on these names. I do not have a great amount to invest. I have allocated 10 thousand dollars for GeoInvesting ideas and for future membership fees! Keep up the great work guys. Es
Hi Maj, Been a GeoInvesting member since Summer 2018. You opened my eyes to the inefficiencies and opportunities in the microcap market. Looking forward to learning more from you and the GeoInvesting team.
7 Reasons to Love @GeoInvesting: * Maj Soueidan is a kind and generous mentor * Experienced and proven tea * Brings you quality microcap ideas * Helps you avoid deceptive companies * Quick and concise research * Deep due diligence * Maj is a top ranked @MicroCapClub member
Thank you for your e-mails. I am glad that I was able to join GeoInvesting. Microcaps are one of the very few niches where a retail investor can do well, and your service looks sincere and solid. I learnt to know about it from a podcast interview with Nate Tobik and Fred Rockwell. I’ve bought a small bucket of stocks that are in the portfolios but haven’t run up yet. From now on I will focus on the daily morning newsletters and add something new that looks promising. I’m grateful that you make the information available through e-mail and not only through Twitter.
Hi, I have already taken some action and purchased some shares in some of the stocks you cover. So far with the information from the GEOinvesting portal I have been able to monitor and understand those shares and navigate the web page easily. The information I am getting from the portal is extremely helpful in understanding why stocks go up or down. Thank you so much for helping me get started and coaching me through this, I appreciate everything Maj, and the Geo team have provided me with.
GeoInvesting is the most valuable microcap research service available today. Their breadth of coverage, when considering depth of analysis, is the most expansive we have yet to encounter. Their coverage focuses on actionable ideas. Their analysis includes considerations of timing and most importantly their thesis and corresponding granular support for their views; and they are transparent with respective to their own positions in the names they cover. GeoInvesting’s principal, Maj Soueidan, is one of the best microcap investors in the equity markets today.
I personally really, really believe that you have the best personal approach to speculation…best odds by far …than anyone else I’ve seen in my 40 yrs at this….no kidding Maj… the fact that it is the closest to my own has something to do with it…as I have been hurt so many times that I only take the smallest risk possible in choosing an investment campaign.
GEOINVESTING has a fantastic team that does amazing due diligence to find potentially explosive opportunities in the microcap space. I have tremendous respect and admiration for Maj the CEO and co-founder of GEO. He is one of the most humble and hardest working, all around stand up guys in the business. GEO has had some amazing calls over the years that makes their service a steal in my opinion. If you aren’t afraid of the space and you understand the risk and potential rewards of microcaps.
“@GeoPremium I have bought calls based on your report, made 100% on my money, could have made 200%. Anyway, great call as always!”
“First off, great site – love the depth of info you give out on my favorite sector — micro-caps”
“Your service is excellent. I have been doing quite well with your recommendations in the ‘buy on pullback” mock portfolios.”
I am glad that I was able to join GeoInvesting. Microcaps are one of the very few niches where a retail investor can do well, and your service looks sincere and solid. I learnt to know about it from a podcast interview with Nate Tobik and Fred Rockwell.