TIP607: Small But Mighty: Uncovering Smallcap Value w/ Paul Andreola

We Study Billionaires - The Investor’s Podcast Network

Stig Brodersen

Education, Investing, Business

4.6 • 3.6K Ratings

🗓️ 11 February 2024

⏱️ 58 minutes

🔗️ Recording | iTunes | RSS

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Summary

Kyle talks to Paul Andreola about how he evaluates smallcap stocks, why flipping over as many rocks as possible is such a strong strategy, why to put all your focus on profitable growing businesses, why the PEG ratio is so important for finding great opportunities, the importance of understanding the capital raising process, why value will always succeed in the long term, the current state of microcaps and much, much more! Paul Andreola is a highly successful microcap investor who has been managing his own money for over 30 years. He is a board member for Atlas Engineered Products, Total Telcom, and Departure Bay Bay Capital. He’s a big proponent of microcap investing and runs an investing community called SmallCap Discoveries where he interviews CEOs of microcap businesses and shares his ideas and strategies. IN THIS EPISODE YOU’LL LEARN: 00:00 - Intro 03:28 - The importance of flipping over as many rocks as possible. 05:00 - The power of owning businesses that institutions can’t invest in. 05:08 - Why focus your efforts on profitable businesses that are growing. 05:22 - How to use the price-to-earnings-growth ratio to help you identify undervalued growth stocks. 06:22 - How to add a margin of safety using the PEG ratio. 06:22 - How to use the PEG ratio to help you determine what needs to be sold. 08:43 - How increasing fund flows can attract low-quality businesses in search of capital. 09:46 - Why owning profitable companies can de-risk your investing. 09:46 - Why you should stay away from low-growth businesses even when they are cheap. 13:23 - Why you should stay away from businesses that are likely to heavily dilute shareholders. And so much more! Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members. Check out Paul’s services at Smallcap Discoveries. Read Paul’s articles here. Learn more about the Berkshire Summit by clicking here or emailing Clay at [email protected]. Follow Kyle on Twitter and LinkedIn. Check out all the books mentioned and discussed in our podcast episodes here. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | Instagram | Facebook | TikTok. Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River Toyota Babbel NetSuite Shopify Linkedin Marketing Solutions Fundrise Wise TurboTax NDTCO Fidelity Vacasa BiOptimizers - Nootopia American Express Business Gold Card Efani HELP US OUT! Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	You're listening to TIP. Really what you're trying to do is you're trying to always have an
0:06.8	understanding of what you think the value the business is and trying to buy it below what that
0:12.2	value is. Now if it's it below what that value is.
0:12.8	Now if it's a growing company, that value theoretically should continue to increase
0:17.6	ideally along with the price, but sometimes the price doesn't properly match it.
0:22.7	So what you're doing is you're trying to, you know, make sure you still have that margin of safety
0:28.4	as that value is growing and that that share price is either, you know either growing with it or perhaps not growing fast enough.
0:36.3	In today's episode I'm talking with Paul Andriola about how we evaluate small cap stocks,
0:44.5	why flipping over as many rocks as possible uncovers the best winners, why to put all your focus
0:49.8	on profitable growing businesses to both increased returns and
0:53.0	decrease risk? Why the price to earnings growth ratio is so
0:56.4	important for finding great opportunities, the importance of understanding
0:59.9	the capital raising process, why value will always succeed in the long term, the current state
1:05.1	of micro caps, and much, much more.
1:07.9	Ever since speaking with Paul on the millennial investing podcast back in August of 2023, I've become
1:12.4	good friends with him.
1:13.0	He's reached out to me and shared numerous great ideas and has happily shared many of his investing strategies with me at a very deep level.
1:19.0	He's been a sort of mentor for me and I feel a lot smarter every time we talk.
1:23.7	Paul's knowledge, experience and passion for micro cap investing are hard to beat.
1:27.8	He understands the discovery process at a whole different level than anybody I've found.
1:32.2	And his entire system for leveraging his knowledge has produced
1:34.4	some incredible picks. His greatest pick of all time was finding X-PEL back on it was trading around
	...

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