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Apr
14
At Investorfile the best stock ideas do not find us; we find them
Posted by: Gerry Wimmer
04/14/2019
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Micro and small cap stocks that are under-analyzed and under-followed present value and opportunity.

Over the years we have been asked countless times by readers of our blog posts what financial screening software and model is used to help identify Investorfile’s Top Ideas?

The answer is none! Surprised?

We are the proponent of the saying that our best investing ideas don’t find us, we find them. That said, financial software tools only help to identify and sort what has already happened. This is largely historical information which is widely available. There is no advantage gained by knowing what has happened in the past.

There is no doubt that Investorfile has embraced the view that individual investors can gain an advantage over professional money managers if they focus on micro and small cap stocks and use a value approach to investing in growth. We feel that buying micro and small caps on a value basis rather than on momentum is a more prudent investment with much less risk. In other words, we look for long-term value with less emphasis placed on short-term momentum.

That brings us back to our investment philosophy. Momentum investing is high risk and is largely based on information that is already been analyzed, thus the momentum and high valuations. Value investing is based on a discovery process based on information that still needs to be deciphered.

Because most small public companies are under-analyzed and under-followed, this market segment is less efficient. Thus, real value can be spotted by individual investors prior to the general investment community to help formulate investment decisions.

At Investorfile, we actively seek out undervalued micro and small cap ideas. We strive to be ahead of the curve therefore no software screening tools using historical data or third-party recommendations are of use to us. Those stock ideas are most likely no longer under-analyzed or under-followed and, hence, undervalued.

Instead, we do our homework by reading and analyzing countless Management Discussion and Analysis (MD&A) reports which are the required quarterly disclosures for Canadian reporting public companies (in USA it is a Form 10-Q) to help discover new investment ideas. Reviewing at least several of a specific company’s quarterly MD&As provides strong insight into operations and trends for the business. As such, the wealth of information gained from such disclosures provides a strong foundation to build our investment thesis and subsequently make stock picks.

One important piece of investing advice: When analyzing a micro or small cap company, always start with the balance sheet. A strong balance sheet provides a margin of safety if the timing of your investment thesis is wrong.


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.