American Consequences - May 2020

When these companies appear on institutional investors’ radar, they take off... like Vipshop (VIPS), a company that appeared on one of our institutional client’s radar. After crossing over a $500 million market cap, the stock was 580% higher in 12 months. AND THE ENTIRE SPACE IS ON SALE While these stocks have massive upside if you can identify the right ones, right now is an even more exceptional opportunity for the discerning investor. While the entire market has fallen due to the COVID-19 pandemic, small-cap and microcap stocks are off significantly more. The small-cap Russell 2000 Index and the Russell Microcap Index have both dropped more than 20% from their February highs. The market has punished these companies even more than the more well-followed names in the market. And that is part of the reason why we at Altimetry are trying to take advantage of this opportunity. We think of it like a land rush in the financial Wild West. Individual investors have a rare opportunity to be the biggest winners... but only if they use the right tools to avoid the modern-day snake-oil salesmen and robbers along the way.

fewer people to hold management’s feet to the fire and provide insight about industry dynamics. That lack of a helping hand means many people won’t spend the time necessary to successfully invest in the space. 3. Microcaps fall outside of institutional investor mandates Many institutional investors aren’t allowed to own microcap names because of their own internal rules. Funds are only allowed to invest in companies that meet the criteria they laid out when they wrote their fund documents, meaning they can only invest in large-cap companies, mid- cap companies, and so on. Some of the most compelling, moneymaking situations we’ve seen over the past 10-plus years have been in this space... For most of them, microcaps are off-limits. Some of the most compelling, moneymaking situations we’ve seen over the past 10-plus years have been in this space... But because our institutional clients can’t buy them, they tell us not to even bother talking about them. That’s why we think the lack of institutional investor involvement in the microcap world presents an amazing opportunity for individual investors. The inefficiencies in this market give us a chance to buy the right companies with the right due diligence for incredible upside.


May 2020

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