Could Your Small Business Be the Next Multibagger Stock? | Ian Cassel

Tim Hanson: I'd Like to welcome to the stage, Ian Cassel. Ian is the head of Intelligent Fanatics and the Microcap Club, which is a, public company focused investment service and fund focusing on micro caps, the very smallest public companies. And he's gonna be talking about the next multi bagger, which is, or, characteristics of multi baggers. Am I right? So these are the very most successful, small public companies.

Ian.

Ian: Well, it's an honor to be here, and you know, I'm sure there's many of you, or probably most of you, that are small business owners. There's probably quite a few of you that are in private equity, have done search funds, are in venture capital, that basically invest in small private companies, but I'm sure that there's probably very few of you that invest in small comp small businesses that just happen to be public, like I do. They have a trading civil, and you can just buy them in a Schwab account. And ironically enough, the companies that I invest in, they look a lot like yours, and, you know, that's one of the points I want to get across today by the end of this presentation. A lot of people forget that of the 70,000 public equities that trade in public markets globally, 65% of them are small micro cap companies that you never heard of before, but a lot of them are the same size of the companies that you run, and that might seem kind of hilarious to you, but it but they exist.

And one of the things that I try to do at Microcap Club, which was basically a private community of experienced microcap investors that are global. We're trying to find the next, you know, big company when it's small, is really kind of keep the light lit of being small and being public. You know, there's these big misperceptions about what microcap investing is. We get kinda thrown into the bucket of penny stocks. You know, we're kind of the slimy, sleazy underbelly of the public markets ecosystem.

And, it's just not fair, because the companies that I invest in, you know, they're they're businesses that look like yours. They're run by people like you that are trying their best, and that's why, you know, I really try to keep the light lit as long as we can, and, it's a it's an amazing place to invest, but it's also that misperception creates a lot of great opportunities as well. I thought I would start off with just 4 facts about microcap investing, just to kind of set the record straight. Number 1, most of the best public markets investors ever, ever, started in micro cap. Most of the best performing stocks ever, were micro caps.

87% of the best performing stocks over the last 10 years, originated out of the nano cap and micro cap arena. And the last point here is pretty unique as well. Micro cap is the only investment class, where the smaller investor has the advantage. Many of you probably know who this gentleman is. This is Peter Lynch.

He's one of the goats of public markets investing. From 1977 to 1990, he rattled off a 29.2% CAGR at his Magellan fund. I'm sure many of you have read the amazing book that he wrote, 1 up on Wall Street, and it's actually in that book that he mentions the term multi bagger for the very first time. I didn't know this, you know, until recently, that he was actually the father of the term multi bagger, and he came up with the term when he was watching a baseball game, and the bases represent bags, and when Peter Lynch talks about a 10 bagger, he's talking about a stock that returns 10 times its original investment. When he talks about a 20 bagger, he's talking about a stock that returns 20 times its original investment, so on and so forth.

And I think for a lot of people, when they think about multi baggers, at least for a lot of folks, probably out here as well, you you think about companies like this, you think about Google, and Meta, and Netflix, and, you know, these are very high performing companies, and Meta has been a 7 bagger since IPO, Google has been a 61 bagger since IPO, Netflix a 300 bagger, Apple a 1700 bagger, that's a 170,000 percent return since 1981. Nvidia has been a 2000 bagger since 1999. Microsoft has been a 32 100 bagger. That's a 320,000 percent return. It's quite astonishing.

And, these companies just happen to be some of the largest companies in the world, as well. You know, it's funny to think that Netflix on here is the baby, at a $200,000,000,000 market cap. Apple of 2.7 trillion. And I think for small business owners like you, including myself, you know, it's hard to get your arms and your thoughts around just the scale and the size of these businesses. I mean, just the amount of employees, the amount of revenue, the global reach, the profitability.

I mean, it's almost like you're staring at a company's on another planet. It's like you're looking at a fairy tale. And, you know, I have good news for you. Most of the multi baggers that occur in the public marketplace, their businesses look a lot more like yours, than they do these up on the screen. A year ago, Jenga Investment Partners, which is a firm out of the UK, published report called Global Outperformers, and what they did was they looked over the past 10 years at all global equity outperformers, so all public stocks that went up a 1000% or more during that 10 year time period, and what they found was that 87% of stocks globally that went up a 1000% or more, originated out of the nano cap and micro cap arena.

What was equally interesting is that 82% of those out performers were profitable. 91% had a history of profitability. So, if you want to find a multi bagger stock, look for something that's small and profitable. About a month ago, I did a presentation in Vancouver, and it was titled multi bagger first principles, and it was a 27 slide presentation, but the most important one is up on the screen here, and I've kind of boiled it down to one sense. To find a multi bagger stock, you want to find an undiscovered company that's growing revenues and earnings, and not diluting.

That last part, it's actually pretty hard. What I'd like to do is kind of go through 4 case studies of companies that represent what true multi baggers look like, And as I go through these companies, I want you to think about your own businesses, and think about, you know, how you're probably closer to the types of companies that I'm going to be showcasing here. In full disclosure, I don't own any of these companies I'm going to be telling you about today, but these do represent the types of companies that I try to invest in early, and that microcap club tries to find early as well. This This company is Armanino, and it trades under the symbol AMNF on the OTC markets, here in the United States. Armanino is the market share leader in the United States in pesto sauce.

65 to 70% market share. Manufacturing pesto sauce. And, over the last 14 years, I don't know if you can read on the left side of the slide, so I'll just read it to you, but over 14 years the market cap has gone from 10,000,000 to a 140,000,000. This is still a micro cap. Revenues in 14 years, from 21,000,000 to 66,000,000, earnings from 1,000,000 to 7,000,000, 8% dilution.

That's the key. Stock price, 30¢ to $4.41. This is a 14 bagger in 14 years, a 1400% rate of return, And I'm sure a lot of you sitting in the audience are thinking to yourselves, 14 years. 21,000,000 to 66,000,000. You know, that's not a fairy tale.

You know, I think I could do that in my business. I could be the next multi bagger stock. The next company is Fitlife Brands and they own a host of brands in the fitness arena. It's mainly supplements, nutraceuticals, protein shakes, things of that nature that they distribute to GNC stores and gyms. It's a pretty boring business.

But the market cap has gone from 3,500,000, that's 3.5, to 90,000,000 in 6 years. Revenues from 17,000,000 to 29,000,000. Earnings from 500,000 to 6,000,000. Zero dilution. That's a key.

Stock price, 70¢ to $20. This is a 25 bagger in 6 years. 25 100% return, and once again, I'm sure some of you are running a company, maybe of this size or scale, or maybe towards the lower end of that and thinking yourselves, you know, I could be the next multi bagger stock. Next company is bio science and bio science trades up on the Canadian Venture Exchange, under the symbol, r x. And what bioscience does is about 90% of the revenue comes from a product they in license to Canada, to fight iron deficiency.

Sold in pharmacies. It's a pretty boring business, but over 14 years, the mari cap has gone from 700,000, yes, it's less than a million, the mari cap, to 90,000,000. Revenues have gone from 1,000,000 to 28,000,000, earnings from 0 to 6,000,000. Zero dilution, this company pays a quarterly dividend and buys back stock almost every day. The stock price in 14 years, 6¢ to $8.

This is a 130 bagger. A 13,000 percent return. You know, there's been books written about a 100 baggers. Chris Mayer wrote a great one, I'm sure some of you have read it. And, it's kind of crazy to think that you can have a 100 bagger stock and it's still only a 90,000,000 market cap company.

And, it's sort of the beauty about micro cap investing, you can make a lot of money investing in a small company that can just become a larger, small company. The last case study is XPEL, and this might be a company that some of you are more familiar with, but, XPEL makes paint protection film. It's clear plastic film that goes on your car, and protect it from rock chips, and over the last 14 years, they've expanded into other things, like window tint, and architectural film. They sell globally now. But over 14 years, the market cap has gone from 1,000,000 to 1,400,000,000.

Revenues in 14 years, 3,000,000 to 350,000,000 went from a slight loss to earning 50,000,000. 7% dilution, in 14 years. That's the key. 4¢ to $50. There's a 1250 bagger, a 125,000 percent return.

The crazy thing about 125,000 percent return is, I think it took Walmart 40 years. I think it took, Apple about 40 years. It took Monster Beverage about 20 years. They did it in 14. You probably never heard of this company.

It's still only a $1,400,000,000 company. It's a small cap by all standards. We had the the luxury of having Ryan Pape, the CEO of XPEL, at our annual microcap club summit, which happened about a couple months ago, and it was an honor to have him there. A lot of our members made a lot of money, life changing money, just being long, expel stock. And I was going to interview him up on stage, and I thought, you know, instead of that, I'd rather have Jason Hirschman do it.

Jason Hirschman is probably the private investor that made more money in XPEL stock than anybody outside of insiders, to be honest with you. You made tens of 1,000,000 of dollars just going long expel stock and now as a family office. So, it was an honor to have those 2 gentlemen talk on stage, because I don't know. I mean, when you think about a CEO that led a company, 1500 bagger as a public company, I don't know. There might be, I could probably count on my one hand or two hands.

How many people ever that have done that? You know, Warren Buffett's one of them. Ryan Pape's another. Steve Jobs didn't do that. So one of the We had a series of conversations, and one of the questions that we asked him was, was being a public company an asset or liability to him?

And, I thought his answer was really interesting. It's a lot of words on the slide, but I'm gonna read them because they're important. In our case, by being a public company, we had this shared purpose. I'd be clear with our team that I'm a large shareholder of the company, but I don't own the company. I could be gone tomorrow and you could still be here.

The company can live on forever. I think that helped create that shared purpose. Being a public company was a good thing for the development of our team. A small company can easily be dominated by the owner. You see it all the time.

This is pretty funny. The new marketing plan for next year is sent to the owner to review, and it doesn't get approved. Then you see the owner drive by with a new boat. He bought the boat instead of the marketing plan. I think we've all experienced that.

This is a cool slide, so the story with Ryan Pape was he became CEO of XPEL in February of 2009. He maxed out his personal credit cards for $25,000 to pay off some company debt. He then started buying some stock. 2 months ago, he sold a 1,000 shares at $75 per share, and in the bottom of the filing, which I know you can't read, it actually lists its cost basis or the time. Its cost basis on that 1,000 shares is 4¢.

$40 to $75,000. Easy peasy. Right? The reason I wanted to go over these stories with you, is because the majority of the multi baggers that happen in the public marketplace, come from boring companies that can simply grow revenues and earnings, and not dilute you. And I think for a lot of small business owners, you don't even think about it as an option.

And the reason you don't think about it as an option is because of the articles you read, or the interviews you see on CNBC saying how expensive it is. If I were to ask you this question, I guarantee that 99% of people would tell me that it's an additional 2 to $4,000,000 to be a public company, and I can guarantee you that 65% of all global equities that publicly trade, that are microcaps, would not be public today, if it costs 2 to $4,000,000 to be public. So, I went to my portfolio of holdings, and the But honestly, the companies that I own look a lot like yours, and I asked them, what's the true cost of being public? And the true cost of being public is probably closer to $2,500,000 per year. And, I think we can all agree that $2 to $500,000 per year is still a significant amount of money, but it's sure a lot less than 2 to 4,000,000.

And, I think that for some of you, not all of you, and maybe none of you, going public should be an option for you. It's something you should consider because it can help elevate your brand. It can help incentivize employees. It can help you have a currency to make acquisitions. And, the best thing about being public is, the one thing the public markets does better than the private markets, is it gives you a premium if you perform and execute.

You could probably manufacture toothpicks and if you just grew revenues and earnings every year for 5 years in a row, you're going to trade at 20 to 30 times earnings. You don't have to sell to Brent B. Shore at 3 times. So, in conclusion, I just wanted to set the record straight about what being a small public company is, because I truly believe that one of your companies could be the next multi bagger stock. Thank you.

This transcript was generated with Transistor AI