WHY we LOVE Small Caps: Asymmetric Opportunities

What we’re trying to do here are two things:

1) Have the right amount of “at-bat” opportunities.

And

2) Hit a home a run.

Sticking to our baseball analogy, out of 100 companies (*ad), maybe 20 are singles, 10 are doubles, 5 are triples, and only 1 is a home run. The rest? Absolute strike-outs. Get ready to be wrong more than you are right when evaluating companies at the beginning. But that one home-run can more than make up for any other misses, and that why we love hunting for awesome small cap companies.

I like to think of small cap investing as very similar profiles to VC investing (*ad), so lets take a look at this chart:

As you can see, there is a large gap between a theoretical “superstar” vs. an average Joe (*ad) when it comes to probability of hitting a home-run. The gap is very wide around the 20-30 mark, but starts to narrow the more “at-bats” we have. This can mean investing in more companies, OR it can mean having a larger watch list of companies.

What we are trying to do is move up the curve from red to green, while also finding how far out on the x axis we need to go. If you can graduate from the red to the green curve (*ad) through doing the work and getting the reps in, 50 seems like the right mark.

Remember what we’re doing this for. Plenty of reps, plenty of failures. But the roar on the home run will make up for it, and then some…

This newsletter contains content sponsored by Investing Ideas. Grit Capital Corporation (“Grit”). has been paid by Investing Ideas to conduct an advertising campaign on this newsletter owned and operated by Grit. Grit will be paid in cash for this advertising campaign. Be aware that the payment received by Grit may put Grit in a conflict of interest with the investor/reader.

Grit is a publisher of financial information, not an investment advisor. Grit does not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient. Grit does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.

THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. INVESTORS SHOULD OBTAIN INDIVIDUAL INVESTMENT ADVICE BASED ON THEIR OWN CIRCUMSTANCES BEFORE MAKING AN INVESTMENT DECISION

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.

The author, publisher or insiders of the publisher may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.

Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and Grit undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.

Grit does not accept any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

By using the Site or any related social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

Grit publishes content through Beehiiv, an email newsletter platform and operates the websites Gritcap.io and and social media accounts (including but not limited to): Instagram, Twitter, Linkedin, TikTok, YouTube, SnapChat, Facebook and Threads. By accessing Grit’s content, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof or any of Grit’s content. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website or Grit constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Grit is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Grit does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the "Securities Act") are available to U.S. investors ONLY who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Grit does not verify the adequacy, accuracy or completeness of any information. Neither Grit nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Grit nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis.

Please read: Terms of Use, Privacy Policy, Disclosure Policy, State Disclosure Policy, and Disclaimer Policy

If you have any questions please contact us at [email protected]