I’m a designated CPA and private Canadian investor who specializes in small and micro-cap companies. For the bulk of my career, I have worked providing economic or risk analysis around business decisions. In plain English, this means that I provide analysis of what future outcomes could look like for potential investment projects – will they make money, or not, and how much.
Throughout my career, I eventually realized that there was a gap in how business managers (and investors) viewed investment outcomes. Business managers, looking to justify their decisions to spend capital, would often defer to what I call “recognizable public opinions”. For instance, if one were to tell them that a large Investment bank thought that the average price of oil would be $75 in 2025, they would be comfortable with this, and this assessment would be a large part of the justification to spend millions of dollars on a major project.
On the other hand, I knew that if one expressed what I call “an opinion based on verifiable real life data”, it was often greeted with skepticism. For instance, I would often sit outside on a sunny day and watch the hotdog vendor outside our office building do booming business as people lined up 10 deep. Because he occupied a strategic corner that was close to the exits of several buildings, his (hungry) potential customers were immediately greeted by the smell of bratwurst. With a little bit of effort, one could make a fairly reasonable assessment as to what this guy was making in a day. However, if one were to make a public assertion about this, it was often greeted with skepticism, as if basic math and economic principles did not apply to small business ventures.
This highlighted the situation which I believe exists today, and will continue to exist for some time. Small and micro-cap companies typically have a following when they initially raise capital, as the underwriting investment bank will often provide glowing reports to entice investors. However, if a company doesn’t require a significant public raise, it often exists in the twilight zone that only small public companies seem to inhabit – too successful to go bankrupt and not big enough that index funds want a piece of them, so their price wanders in the wilderness, and nobody really cares (or understands) the company. This is exactly where price inefficiency lurks.
This is where I show up. I practice what I call “boots on the ground” investing. Sure, I look at the published financials, and I look at the chart, but I do a bit more than that. If possible, I buy the product (that the company makes) and I take it apart. I see if it works. I talk to those customers who have bought the product. Do they like it ? Does the company treat them well ? If the product is necessitated by law or regulation, I call the governing body and ask them about the problem that the product is solving (or not). If the company has a local office or factory, I visit. From all of that, I then model financial outcomes based not only on “numbers” but on all of the information I have drawn from all of these sources. The information that comes from these non-traditional sources provides insight into trends, and what sales (and costs) could look like. For instance, recently I was on vacation and noticed that my drink didn’t have a straw. I asked the bartender for one, and was told they didn’t have straws, as the resort was part of a program to minimize plastic waste, which often ended up floating on the beach. I immediately thought to myself “is there a company out there that only manufactures straws?” If so, looking at last years financials (in isolation) probably wouldn’t be a useful exercise.
So, this small space on the web is where I publish my thoughts (and analysis) about those companies I’m interested in. I publish infrequently, as I consult to industry doing the same kind of analysis, so my time is limited. Regardless, feel free to look around, and let me know if there’s something you like, don’t like, or if there’s a specific company or industry that you have a particular interest in. I can be reached at mark@grey-swan.com.