Best Micro/Small Cap investing Books?

Does anyone know really good books on micro to small cap investing (on companies valued from $25 million to $250 million)? Looking for a book that guides an investor on how to analyze these stocks--kinda how buffet's, lynch's and graham's book do on large cap stocks.

Thanks in advance. I Can't find any good ones so far.

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Comments (6)

Best Response
Oct 31, 2016 - 1:01pm

small/micro cap investing, assuming you're talking about long only bottomsup stock picking is not unique. same strategies you should use on companies that are larger, with a few non-accounting things to be aware of:

  1. who owns the stock? small/micro companies are usually closely held, so make sure you know who you're going to be alongside

  2. what's volume/spread like? you can have a great idea, but if you can't initiate a position without spooking the market, maybe not worth it.

  3. financial condition? MSFT can get away with 30% of its capital being debt (as an example), but with small/micro companies, they can't always access capital markets so they have to go to middle market lenders which either won't lend or will with exorbitant interest rates. you could have a company with a cash cow product, but if all its money is going to interest coverage, keep away.

  4. major customers? sometimes small companies exist solely to sell to one or two buyers. for example, if Oracle lost Merrill Lynch as a customer, it wouldn't miss a beat. but small companies losing a big customer could be an insurmountable loss.

all of the other stuff (moat, diverse product mix, market leader, ROE, etc.) all important, and the best smaller (never gone micro) cap buys I've done were when I approached the analysis like a PE investor or a larger company. more often than not, the company did get bought out.

read up on chuck royce, all he does is small/micro. also ron baron.

May 6, 2021 - 12:22am

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