05 September 2023

Kyle Grieve chats with Paul Andreola about his discovery investing system for microcrap stocks, why focusing on undiscovered businesses is so powerful, his approach to discovering undervalued stocks, why holding onto your winners is so important, and much, much more!

Paul Andreola is a successful investor, board member, and investing speaker. He invests in undiscovered Canadian small cap businesses and shares his ideas with his private community and on Twitter.



  • How the discovery process works.
  • Why microcaps offer significant value.
  • The importance of financing in the discovery process.
  • How share price can be used to identify inflection points.
  • Why Canada’s filing system SEDAR helps keep businesses undiscovered.


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Paul Andreola: When you have a company that’s going up 10, 20, 30 times in value like Expel did pretty quickly, it can be oversized position. I’m not a believer that you trim because it’s become a big percentage of your portfolio. You wanna constantly make sure that you got that wean Gretzky on your, in your lineup, right?

[00:00:14] Paul Andreola: And if you’ve got ’em, you put ’em on the ice as much as you can. You hold him as long as you can. And then when you see he’s he’s losing his edge, then maybe you take him off the ice a little bit. 

[00:00:24] Kyle Grieve: In this episode, I chat with Paul Andreola about his discovery investing system for Microcap stocks.

[00:00:30] Kyle Grieve: Why focusing on undiscovered business is so powerful, his approach to discovering undervalued stocks, why holding onto your winners is so important and much, much more. Paul Andreola is a successful investor board member and investing speaker. He invests in undiscovered Canadian small cap businesses and shares his ideas with his private community and on Twitter.

[00:00:50] Kyle Grieve: I found Paul on Twitter and I’ve learned so much from him, from his timeline, from direct messages with him, his website and previous interviews. He’s also helped me learn about a bunch of interesting small caps I’ve researched. If you’re interested in investing in small caps, he’s a must follow now.

[00:01:06] Kyle Grieve: Without further delay, let’s get right into this week’s episode with Paul Andreola.

[00:01:12] Intro: You are listening to Millennial Investing by The Investor’s Podcast Network, where your hosts, Robert Leonard, Patrick Donley, and Kyle Grieve, interview successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

[00:01:36] Kyle Grieve: Welcome to the Millennial Investing Podcast. I’m your host, Kyle Grieve, and today we bring Paul Andreola onto the show. Paul, welcome to the podcast. 

[00:01:45] Paul Andreola: Hey, thanks, Kyle. Happy to be here.

[00:01:46] Kyle Grieve: I’ve been following you pretty closely for over a year now as you have some ideas that I really resonate with. I’ve asked you a lot of questions on Twitter, and you’ve given me some insightful responses in terms of analyzing small cap businesses.

[00:01:58] Kyle Grieve: Your entire strategy is very unique in that you only target businesses in Canada that are largely undiscovered. Can you go over your investing system in a little more detail for people who maybe aren’t familiar with it, and tell me why you only stick with Canadian businesses. 

[00:02:12] Paul Andreola: Well, it maybe a little bit of background might help answer that question.

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[00:02:16] Paul Andreola: So I originally, I started as a carpenter, so physical work that I, I got tired of pretty quickly. But actually I went into the investment industry, became a broker, and eventually became an investment banker. But really what I learned there is that I learned how the system works. I learned how the investment system works.

[00:02:35] Paul Andreola: And once I understood that I should figured out little ways to hack the system, find unique things that gave me an edge. And what I really came to understand is I had to concentrate on something and get real good at. One sector of the market and the sector happened to be microcaps. And then when I shrunk the universe of microcaps down even more, I thought I had to be an expert in one, one side of that microcap market.

[00:03:00] Paul Andreola: And I being Canadian, I picked the Canadian market. And I think what also helped was the fact that the Canadian market, it’s less well known, it’s less well understood than the US market. So you were seeing valuations that were significantly different than what you were seeing in the us. And because I knew how the system really worked.

[00:03:16] Paul Andreola: I tried to find spots where, you know I had that extra edge and really it was a function of studying this one sort, I call it my sandbox, studying my own sandbox really well and knowing where those little nuances were or where the mispricing was. Little things like that. So it’s really a function of trying to be an expert in one space, trying to get that extra edge against everybody else.

[00:03:39] Paul Andreola: And because I knew the Canadian system better than any other, that’s where I really focused. 

[00:03:45] Kyle Grieve: Yeah. And so with the companies in Canada that you do focus on, you’ve mentioned obviously, that you want undiscovered businesses, so a lot of these are pretty, pretty immediate right after their IPOs. How do you look at some of these businesses that maybe aren’t even profitable or sometimes don’t even necessarily have revenues yet?

[00:04:06] Paul Andreola: Okay, so again, understanding how the system works, what, while I follow companies that IPO, I tend not to invest in a lot of new issues. What I noticed over time was that a lot of these IPOs tend to go to the market really early. And again there’s a difference between the Canadian sort of capital markets in the US capital markets.

[00:04:24] Paul Andreola: In the US the VC market is much more mature than it is in Canada. So you tend to see companies that stay private longer, especially the better ones. They stay private longer, they get funded better. Whereas in Canada, they tend to go public significantly sooner because they just don’t have the same kind of capital access from the venture capital markets and as they do in the us.

[00:04:42] Paul Andreola: So you see a lot of these companies, I feel way too early and the majority of ’em actually don’t do well. But the ones that sort of. Struggle and learn how to survive on their own without that extra capital that you constantly need at an early stage. Those are the ones that tend to be outliers.

[00:05:01] Paul Andreola: They tend to learn the hard way. They tend to because there’s a lack of resources, they’re a lot more efficient with their resources, whether it’s money people. Even their shares, it’s baptism by fire, right? They’re actually learning out there. So what we do is we follow these IPOs and we wait until we see an inflection point.

[00:05:18] Paul Andreola: Sometimes I’d say 90% of the time there is no inflection point and the company is done and it’s having to find some other sort of pivot or something like that. But the odd one that does starts to do the right things, but at the same time it’s not getting the attention from the market.

[00:05:33] Paul Andreola: Now you’re an undiscovered, almost orphan. You’re doing all the right things, knowing the industry like I did. I also know the investment banking side, which drives so much of the micro cap space in Canada, the investment banking side, they don’t care if you’re making money now, right? If you’re making money, there’s no reason for them to get involved.

[00:05:49] Paul Andreola: So here you have this circumstance where companies finally figured out how to turn into a real business. It’s starting to make money. Everybody’s forgotten about ’em. And the investment banking community, who usually does the homework at trying to find places to go and. Invest capital, they have no need to care because they can’t invest any capital, these companies.

[00:06:05] Paul Andreola: So you have this small subset of this whole microcap ecosystem that has gone through all that stuff and is grossly mispriced to the market. And that’s where we come in. We try to capture that company at that inflection point before anybody else pays attention. Hence this undiscovered sort of feature that we keep talking about.

[00:06:25] Kyle Grieve: Gotcha. And I definitely want to get more into that. But first I just want to get to know a little bit more about your background. So you mentioned you have a background in construction and investment banking, and I’ve also just from my research, saw that you’ve also worked as a stockbroker and some startups I believe as well.

[00:06:40] Kyle Grieve: So my question is, how have these experiences that, from previous jobs that are obviously some of them are investment related, but how have they helped shaped your investing strategy and philosophy today? 

[00:06:53] Paul Andreola: Well, construction helped shape it because I realized how much I hate physical work and how lazy I actually am.

[00:06:59] Paul Andreola: I mean, work ethic. That’s part of it, I think, from that type of job, but where I really start to understand businesses. In the startup phase, I was involved in two companies. I was a founder of two tech startup companies and really learned again what the market looks like from the. Inside of a business rather than from the outside.

[00:07:17] Paul Andreola: So I really understood how investment bankers work and how the industry treats companies that are successful, then not successful need money, don’t need money, all those things that allowed me to be behind the curtain and understand what goes on behind these businesses.

[00:07:34] Paul Andreola: While they’re trying to deal with capital markets. So I think that was a real good experience for me. I also realized we, we had a very successful, a company that went public and we had one that went, that wasn’t able to go public because it couldn’t get enough money. So you really start to understand like the capital requirements and needs and how the industry and just the world.

[00:07:52] Paul Andreola: Sort of revolves around you as you’re trying to grow this little business. So that was real helpful. And then of course I said once I was in the capital markets, the sort of, the knowledge I gained from there was really how all these companies struggle and have to deal from that end of the business.

[00:08:06] Paul Andreola: So I come to investing, I think with a lot of unique experiences that allow me to have different views on these businesses that I eventually try to invest in. 

[00:08:15] Kyle Grieve: So on one of your previous interviews, you actually mentioned two books, but one that really stood out to me was what Works on Wall Street.

[00:08:23] Kyle Grieve: You said that this book had a big impact on you, and I was just wondering what are the primary areas of that book that helped impact you and shape your current investing system? 

[00:08:34] Paul Andreola: So there’s a number of books that really have had an impact. What I like about most of these books or the ones that have given me an impact, there’s at least one or two takeaways that I get that sort of have shaped my vesting strategy, what works on Wall Street.

[00:08:46] Paul Andreola: What it did was basically, I wish it was the first book I read, I. When I got into the industry because it took me 10 plus years of experience in trial and error and school hard knocks, whatever you wanna call it, to learn what I learned in that book. And it solidified my belief that where I was operating was the place to be.

[00:09:04] Paul Andreola: So what works on Wall Street is basically, A synopsis of all the data from I think over a hundred years of how the stock market works and what works best in there. So whether it’s large caps, mid caps, small caps all those things, growth versus value. And over time what they found was that basically small profitable growth companies far outpace all the other categories of stocks.

[00:09:27] Paul Andreola: Right Now I’ve learned that by mistake. Trial and error over 10 years. Right. Had I known that in the beginning, I would’ve spent a lot more time focusing on that. So that was a big thing. It really gave me the confidence that where I was working was the place to be, and it really just allowed me to double down on, on stuff that I was experiencing and seeing that was working.

[00:09:45] Kyle Grieve: I, look, I got the book and I really enjoyed a lot of pars for it. I obviously I bought it after you suggested it, so I already saw that I had that lens of the small cap, so I looked at everything that they mentioned about small cap and yeah, I mean, like you said the data really does support small cap performance.

[00:10:02] Kyle Grieve: It has some other really interesting things like I know you also mentioned price, momentum and buying at 52 week highs and how that can basically help impact the way you invest as well. 

[00:10:15] Paul Andreola: So that I got from a different book called How to Make Money in Stocks, so by William O’Neill. That one I actually read.

[00:10:21] Paul Andreola: Before what works on Wall Street, and it blew me away because I I’d studied the markets, I’d read all sorts of books in the past I’d actually gone through my course to become a broker and get licensed and throughout all these other books, it was basically ingrained in you that the idea is to buy low, sell high buy when something’s low and sell when something’s high.

[00:10:42] Paul Andreola: And that’s the nature of everybody’s thinking when it comes to investing. But this book, Really changed my line of thinking to say, okay, no, you wanna buy high with the idea that you’re gonna sell a lot higher, and by buying high, what you’re finding is companies that are actually already doing things right.

[00:10:58] Paul Andreola: If a company’s gonna go up a hundred times in value, well it’s gonna be hitting a 52 week high a lot of times before it gets there. So that was one of the key things I got from that. But then also the criteria that you have to look for that justifies why it should keep going higher and higher.

[00:11:12] Paul Andreola: And it’s things like rapid growth rate is a smaller amount of shares outstanding. Yeah. I really start to understand the discovery process because you wanna buy before all the institutional investors are buying. These are critical pieces. There, there’s a number of other things in there, but it really was I like to say it changed my financial future, that book, when I read it, because it really put so many of the theories that I had ingrained in me, it threw it upside down and really made me think differently and allowed me to finalize the strategy that, that I have now.

[00:11:43] Paul Andreola: It’s a big cornerstone of what I do. 

[00:11:46] Kyle Grieve: So I’ve had the c a experience and seeing the website makes me think that I am logging onto the website with a dial up for the first time. So for those of you of my audience who don’t know what SEDAR is, it’s an acronym for System for Electronic Document Analysis and Retrieval.

[00:12:01] Kyle Grieve: So for us listeners, you can think of it as a Canadian version of Edgar. So you’ve said that it’s the c a process and the fact that it’s ancient looking is part of the advantage of your system because only those who are willing to do the work of going through all the different filings are gonna find the best opportunities.

[00:12:19] Kyle Grieve: Is there any new technology that you’ve come across that helps you filter through SEDAR more quickly, or is it still all manual work? And if technology were to come along that would make filtering SEDAR easier, do you think your system would still work as well as it does now? 

[00:12:34] Paul Andreola: So, yeah I think I have a competitive edge because, like you said, the system from the 1980s, which by the way, they’ve just changed it over the last couple weeks and I didn’t think they can make it any worse, but they actually did.

[00:12:45] Paul Andreola: So I’m happy with that because that’s gonna block a lot of other people from doing what we do. But I I think there’s always. Tools that can make it a little bit easier. And there’s all sorts of software screening systems that are out there. I’ve got experience that some of these software systems, there’s always one or two that fall between the cracks.

[00:13:03] Paul Andreola: And the beauty is those are the ones that you actually wanna find more than any others because, it’s significantly less discovered if everybody’s using software to try to screen these. Everybody’s doing the same thing. There’s no real advantage, right? So we do it manually. We physically read filings.

[00:13:19] Paul Andreola: We also get a feel for these companies when we do that. So doing software screening by itself is not gonna give you the same feel as reading a, an annual report or reading quarterly report. So I think we’ll always have an advantage in doing that. You get that different feel, you get to understand companies a little bit more.

[00:13:34] Paul Andreola: And what we end up doing is we start to, we saw, we almost get a feel for a company before. It triggers the criteria we look for. So we’ll get to know companies a little bit better by doing this manually. And just so you know, like we spent maybe a half an hour to an hour a day, depending on how. Busy. The filings are that day and we go through ’em all on a daily basis.

[00:13:52] Paul Andreola: And then several times a year we’ll do sort of an A to Z where we go through all the companies again. And it’s a big advantage. Like it’s a big advantage we’ve seen in the past. But one of my biggest wins ever is a company called Expel. Expel for a few different reasons, fell between the cracks. It was very undiscovered at the time.

[00:14:08] Paul Andreola: I found it using that manual process of going through filings. And as long as I’ve had that as an experience, I’m gonna keep doing it. Like you can’t. No point in fixing it if it’s not broken. So I. 

[00:14:21] Kyle Grieve: Excellent. So you mentioned in other interviews that you’re looking for two consecutive quarters of earnings before a business starts to interest you as part of your discovery process.

[00:14:30] Kyle Grieve: So how do you view short-term tailwinds as part of your process? Are there specific areas in a business that are displaying some durable competitive advantages that make you confident that earnings are likely to stay positive for the near future? And what might signal you that the earnings boost is only short term?

[00:14:47] Paul Andreola: So that’s a great question. It’s something that’s really been prevalent over the last couple years because of the pandemic. We’ve had a lot of businesses that have had paradigm shifts that are short-term in nature and then others where there’s probably a longer term tail to it, but may have been impacted by pandemic.

[00:15:05] Paul Andreola: So a lot of work that we do is to really try to determine how and why the trend is in place. So the reason we look for two quarters, Of, you know, profitability. That doesn’t necessarily mean that’s the first time we’ve seen the company. We may be tracking it for several quarters, and now those two quarters have triggered what we’re looking for.

[00:15:25] Paul Andreola: We wanna see a trend, right? One data point or one quarter is not a trend, but if we have several quarters, now we can identify that there’s a trend here. Then we wanna try to identify why that trend exists. If it’s because there’s a brand new product, then likely that product is not just a one-off and it’s fleeting it we wanna see if that product has longevity and we wanna understand a bit of the competitive market.

[00:15:48] Paul Andreola: So there’s a number of things we look for, and quite frankly, a number of the other criteria we use increases our odds that we’re onto something where that trend has longevity. So it’s a bit of a trigger point, but, That’s likely a trigger point after a number of other trigger points that we’ve been dealing with.

[00:16:04] Paul Andreola: And like I said, in most cases we’ve been following the company for several years and now that’s just that point where we’re so, okay, now it’s time to look at buying it. 

[00:16:12] Kyle Grieve: So moving on to the retail part of investing. So the retail interest in nano caps and micro caps seems to be getting larger and larger with the popularization of websites like yours, the Small Cap Discoveries, micro Cap Club, Twitter sub stack.

[00:16:26] Kyle Grieve: There’s a wave of new retail investors that are discussing or seemingly discussing less discovered ideas. Are you finding that this wave of new interest is disrupting your strategy in any way? Or is it just validating that an idea that you have is already undiscovered if no one’s still talking about it?

[00:16:43] Paul Andreola: Another good question, and I’ve been doing this so long, I’ve seen waves of this sort of stuff come and go. Back when I, years ago, when I first joined the Microcap Club, I remember there was a, what seemed like a large group of ambassadors that were interested in microcaps. But what I really learned was we were fanatics.

[00:17:00] Paul Andreola: Like we were a smaller group than I thought, but we were just crazy to wanna deal with microcaps. But we tend to see is over time when microcaps are really working well. You see a big influx of investors coming down to the micro caps, and when things get bad or slow, they leave, right? And I’m less worried about the retail investor than the institutional investor.

[00:17:19] Paul Andreola: What the other thing I recognize is that, again, in my days in the industry, I saw this, the institutional investor tends to go up and down market as well. That’s really where the capital is, right? So when retail can have a little bit of influx of capital, but when the institutional guys come, that’s when you start to see meaningful moves in the stock.

[00:17:37] Paul Andreola: So I don’t, I won’t say the retail investor tends to be a lot more emotional, so they tend to be very fleeting and they don’t have that same impact. And what I also find is that if you get really good as a retail investor, you get really good at the microcap. Sooner or later, you’re you’ve outgrown the microcaps, so you’re constantly, I hate to call them amateurs, but you’re, if you stay in the microcap space, you’re constantly competing against amateurs.

[00:18:01] Paul Andreola: So I’m not worried about the retail guy. It’s the institutional guy that finally wakes up one morning and says, Hey, wait a minute. There’s just too much value down in the micro cap space. I better get down there. Right now we’re not seeing that. We’re seeing quite the opposite where institutional guys are going up market ’cause they want liquidity and they want assurance that they can sell something that they need to.

[00:18:20] Paul Andreola: But like I said, it comes in waves. I’m not worried about any of the other retail guys right now, other than, I mean, there’s a handful of real smart guys that I have to bump my head against all the time. But so far, so good. 

[00:18:32] Kyle Grieve: Interesting. With the waves of interest, obviously that happens all over the market, but have you found that there’s been waves of interest from institutions specifically into micro caps in the past?

[00:18:43] Kyle Grieve: Once valuations get more attractive, or if you start seeing bubbles in there that just start attracting more 

[00:18:48] Paul Andreola: capital, Yeah, like two years ago when we had a real bull run in the micro caps, that’s exactly what happened. You saw institutional investors, like what I’ve really noticed in my career is that you tend to see these levels.

[00:19:00] Paul Andreola: There’s these micro cap or market cap levels that are almost gates, right? So really almost anything under $50 million market cap in Canada, you see very little, if any institutional interest. Between 50 and a hundred million. That’s when you start to see some of the smaller groups start to come down, market and play in that area, and then over a hundred million.

[00:19:17] Paul Andreola: That seems to be the real spot where these institutional guys start to take an interest. So when things get real exciting, you see them start to move those levels down a little bit. So I’ve seen in, in the height of the bull market for microcaps, I was watching ’em invest in 10 and $15 million market cap companies, which was right now.

[00:19:35] Paul Andreola: I mean, they wouldn’t come close to anything like that. So yeah, they come down and of course the minute they get spooked, they run away. And hopefully that’s when guys like me come in and start to pick up the pieces after they’ve run away with their tail between their legs. 

[00:19:47] Kyle Grieve: So with this discovery process, even obviously doing it for a really long time, what are the primary risks that you’ve observed or maybe you’ve experienced from using your process that you’ve created?

[00:20:01] Paul Andreola: Okay, so I mentioned liquidity a couple times. I think that’s something your batting average has to be a little bit better than average if you’re playing down here. Otherwise, you’re gonna get stuck with investments that they’re gonna be very hard to sell even if you wanted to, especially as you grow your portfolio in size if it’s small amount and it’s a little bit easier, but that’s one of the issues.

[00:20:18] Paul Andreola: So you have to have a high degree of confidence in the investment you’re making. You have to have that margin of safety really. So that’s what I’m looking for, is to mitigate some of those and. The way I structure my portfolio actually is how I deal with some of that risk. So I my initial position, my starter position, anything I really like, it’s never too big that if something goes wrong and I can’t get out, that it’s gonna have too much of a material impact on my overall portfolio.

[00:20:45] Paul Andreola: That being said, and from time to time, I’ll grow my position because things are going well and then something goes wrong. Well, I. Ideally the stock’s gone up enough where even if I’m selling, I’m doing okay. That’s what I’ve seen historically happen. So I’m, as I’m getting older, maybe it’s my, just my conservative nature as I get older or just laziness or what I’m saying no more often, and I’m trying to really find those fat pitches or those opportunities where my wrist is far out weight by my upside, and it gives me that.

[00:21:17] Paul Andreola: That ability to take a chance and and like I said, part of my sizing is my strategy to mitigate some of that risk as well. 

[00:21:25] Kyle Grieve: You mentioned previously that every six to 12 months that you like to go through all companies in your investible universe, starting with the A’s and down to the Zs. You mentioned that this process usually can bring up anywhere between five to 10 names that interest you, but I’m interested in knowing.

[00:21:42] Kyle Grieve: How long this process takes, and outside of obviously finding interesting names, what other hidden benefits does this process give you? 

[00:21:50] Paul Andreola: So it usually takes, I’ve got a partner that I work with that helps me go through these. So we compare notes at some point, but it’ll take me a solid week. I basically have to lock myself in a room and have my wife feed me under the door for about a week as I go through these things.

[00:22:06] Paul Andreola: But, so yeah, we do it two times a year and we’ve already got a comfort level with these companies because we’ve seen them already. So it doesn’t take us the inordinate amount of time to. To review them, but the benefit is that we feel confident that nothing’s slipping between our fingers, right? So we’re making sure that we’ve got the whole landscape covered.

[00:22:24] Paul Andreola: But the other thing, it does that it helps us when we find things or we don’t find things, it helps us gain confidence in our existing portfolio, right? We wanna feel like we have the best stocks that are hitting our criteria out there. And if we review at all times, then we’re, we know.

[00:22:42] Paul Andreola: Where the good stuff is and hopefully it’s in our portfolio, right? So it, it gives us that added comfort that that we own the best of the best in the space that we’re looking at. 

[00:22:52] Kyle Grieve: Yeah, that makes sense. And so you mentioned that you have a partner, so does having the partner definitely make that process of going through them a lot quicker?

[00:22:59] Kyle Grieve: Like, are you guys splitting it up 50 50? Or are you literally all just going through it, both of you, going through all of them, and then just comparing notes between everything that you find? 

[00:23:09] Paul Andreola: Yeah. So we go through all of them and then we compare notes, right? So it’s not that it makes it quicker, what it does.

[00:23:14] Paul Andreola: If anything, it makes it longer because we are, we’re, we will argue things, right? Which I think is very healthy and we come at it from different angles too, right? So my partner used to work for the TSX exchange. He was an analyst there, so he has a. A slightly different view on things. He’s a lot more looking into some of the reasons and some of the filing components of what they’ve done.

[00:23:34] Paul Andreola: Whereas I’m looking at much more from a fundamental standpoint. And then, I mean, the other big piece we do is we actually look at some of the people and because of our context within the industry, we get a bit more due diligence on some of the people not just in management, but in microcap space.

[00:23:48] Paul Andreola: You have to understand there’s a lot of people in the background, right? There’s a lot of financing people and. People that are major shareholders and things like that you need to know. So, coming at it from two different angles, coming at it from different viewpoints, being able to argue different ideas, I find that very helpful.

[00:24:06] Kyle Grieve: How do you view shares outstanding growth during the discovery process since many of the businesses you are looking at are just recently turning profitable? Is it safe to assume that many are gonna be issuing equity in order to finance their growth? And how do you factor dilution into whether the investment will create value for shareholders as they continue to grow?

[00:24:26] Paul Andreola: So, so that is one of our key criteria we look for is the amount of shares outstanding. And we try to determine what the financing risk is, right? What’s the risk that they’re gonna need to finance and dilute some more. So one, one of the nice things is when a company does turn profitable, right? That’s the gatepost, if you wanna call it that, where they’re finally in position that they don’t need the market to continue to fund them, or at least they’re significantly closer to that point.

[00:24:49] Paul Andreola: So it’s not unusual though to see companies at that point still want to get some outside funding because they may be growing now. For a reason that requires ’em to bring in more money. They’ve launched a new product, they wanna grow faster. Maybe they’ve seen some acquisition opportunities, but usually when they get to that inflection point, the reason they’re looking for cash is to further grow their business, right?

[00:25:10] Paul Andreola: Either through an acquisition or product launch, something like that. So it’s actually a good reason to raise money in my opinion, if a company’s burning money, if they continue to lose money, we find that as is not as good a reason to go and raise money. So we try to avoid that. But I’d almost say at that point it’s less than 50 50.

[00:25:26] Paul Andreola: There’s still a lot of companies that will go out and raise money, but the majority won’t. And sometimes we look at the companies that are raising money. Sometimes that actually turns out to be an opportunity because these are illiquid companies in a lot of cases, especially if insiders own large positions.

[00:25:41] Paul Andreola: Sometimes we’ll actually approach those companies and say, look, your balance sheet is still a little offside. You need some money. Why don’t we raise the money? Why don’t we give you the money? That’s how we get our position. You guys get the capital you need you’ve got a good sort of capital markets partner and you guys can accelerate your business.

[00:25:56] Paul Andreola: So we don’t necessarily view it as negative, we view it as potentially as an opportunity, but it is something we wanna really understand. And once we’re involved, we wanna see that there’s not a lot of reasons to go and raise more money unless it’s something that’s gonna really change the growth pattern in the business.

[00:26:14] Kyle Grieve: So I mentioned previously about how you enjoy using kind of momentum and looking at stocks that are trading at those 52 week highs because it is starting to show an inflection point in the business. So with that, obviously stocks trading at 52 week highs can obviously be offering. Returns that aren’t necessarily the best.

[00:26:35] Kyle Grieve: So how do you interplay looking at stocks at the 52 week highs as well as value? And are you finding that in the microcap space that there are sometimes stocks at those 52 week highs that just they’re not feasible investments because of the price, 

[00:26:49] Paul Andreola: the function, or understanding what drives a 52 week high is something that sort of has made my strategy what it is.

[00:26:58] Paul Andreola: I don’t just buy companies that are hitting fit Two, sometimes I’m the driver or the discovery process, whether it’s me or somebody else, that’s what starts to drive this sort of move or trend towards Fitch two Highes. So more times than not, because I’ve got a larger pool of capital than I started with years and years ago, I’m more confident in buying before it’s hitting a Fitch two Kai.

[00:27:20] Paul Andreola: If the fundamentals make sense to me, and then what ends up happening, because some of these companies are relatively illiquid, I’m the driver of that 52 week high, or somebody like me is the driver. But now, because I understand what’s driving it The company’s been discovered, the company is now being noticed, and if I have a position and I’m starting to see that happen, then I understand where it is in that discovery process, right?

[00:27:45] Paul Andreola: So it’s not make or break anymore. I don’t need to see a 52 week high, but I love to see it once I feel the discoveries process has started, and then I can fine tune how I sort of act. Based on that fixed two week high, right? So I’m not afraid to add to my position because it’s hitting a fixed two week high that’s actually encouraging me to add to my position.

[00:28:05] Paul Andreola: So it’s things like that, having understood what it all means, the background fundamentals that drive it, the background discovery process that find that’s driving it, and then ultimately it helps in determining how I go about selling position if necessary. 

[00:28:19] Kyle Grieve: So you’ve said in previous interviews that after buying a stock, you are often trying to find reasons that you would not want to add to the position.

[00:28:27] Kyle Grieve: So obviously it’s gonna be company dependent, but what are some of those types of fundamentals of specific businesses you’re following that help you determine what a business is indeed improving and maybe you should be putting more of your money into? 

[00:28:40] Paul Andreola: So really you establish a thesis as to why you wanna own at the beginning.

[00:28:44] Paul Andreola: So a company, let’s say a company’s growing at 30% a year. It’s trading at single digit price. Earnings ratios its earnings are growing nicely. There’s leverage in the business. These are some of the fundamental reasons why we actually want to own that stock. So provided those things continue to happen, sometimes we see an acceleration of growth.

[00:29:02] Paul Andreola: We see acceleration of that sort of stock. We’re gonna continue to own that stock. We’re gonna continue to wanna own more of it. If it keeps giving us a margin of safety to what we think. The real value is. So those are the drivers that we’re gonna constantly look for. Now, if something breaks down and all of a sudden the company’s not growing anymore, well that starts to give us a reason to look at selling, right?

[00:29:22] Paul Andreola: That, that’s one of many different reasons, but that’s one that we’re gonna look at. And then remember, we’re not just looking at our portfolio, we’re measuring our portfolio gains, everything else that we have. An opportunity to invest in. So if we see a company that’s growing at 30% a year and it’s trading at 15 times earnings, but we just found another one that’s growing at a hundred percent a year and trading at 10 times earnings, well we’ve gotta offset that decision and maybe that’s a reason we’re selling even though this other one is doing okay.

[00:29:51] Kyle Grieve: What are some red flags that have been thrown up in an investment that you’ve already purchased that have prevented you from adding to a position or maybe trigger you to exit earlier than expected? So you mentioned a little bit just previously, but how are you looking at, say, returns on capital margins, KPIs?

[00:30:10] Kyle Grieve: Are all those types of things also gonna be helping guide your decision making if you need to get out or add or just maintain a position? 

[00:30:18] Paul Andreola: Yeah, so exactly, that’s exactly what we’re looking for is some deterioration in the underlying business. Whether it’s something that’s, again, like I said, the growth has changed or maybe the profitability has changed.

[00:30:28] Paul Andreola: We wanna understand why these things are happening. Sometimes you’ll see them because they’re going to they’re investing in future growth. Their their r d spend is going up because they’ve got some new products they wanna launch. Maybe they’re selling spending more on marketing because they want to get more aggressive in growing the business.

[00:30:43] Paul Andreola: These are all things that you have to understand to determine what the future outlook looks like and what the risk profile of whether it’s changed or not. So those are things we look for. But more significantly, the fundamentals can be relatively easy to understand. See if there’s deterioration there, but there’s a lot of capital markets.

[00:31:00] Paul Andreola: Things that microcaps do that I think are red flags, right? When you see them start to issue a lot of shares when they’re looking at financing. For reasons that don’t make a lot of sense, or they’re spending egregious amounts of money on investor relations or something that doesn’t make a lot of sense.

[00:31:14] Paul Andreola: You have to question their capital markets savvy and I’ve seen a lot of companies fall apart when they don’t understand. That part, right? The, maybe the insiders don’t own enough stock, so they’re trying to they, they don’t have the same vested interests as shareholders do.

[00:31:30] Paul Andreola: You’ve gotta watch the capital market steps that they make very carefully. And I, I learned years and years ago that, and this is part of our due diligence, is you wanna really understand the makeup of the board and to see if there’s someone in there that can help guide the c e o in making sure he doesn’t make Standard capital markets mistakes and there’s lots of ’em.

[00:31:49] Paul Andreola: We see a lot of that goes on and sometimes it’s not the fault, the c e o, they just don’t know better and they’re getting some poor advice. 

[00:31:56] Kyle Grieve: So looking at that board member that you just discussed, who could maybe help guide, how do you know what person to look for in the board? Is this just part of your due diligence process when you’re looking at a specific business, or is this kind of just insider knowledge that you know from having worked in the industry for so long?

[00:32:14] Paul Andreola: So it’s a little bit of both. A lot of times when we do look at a company and sometimes through an interview with management, we try to determine who on the board has a vested interest. Meaning they, they own a significant amount of shares and have capital markets knowledge, right? So somebody usually you see a board that has certain different industry expertise and.

[00:32:33] Paul Andreola: Sometimes it’s all based on the industry that they’re in and that, that’s fine. But when you get a legal question, when you get an accounting question, when you get a capital markets question, who are their advisors? Right? And if their advisor is an investment banker, then you know, we get nervous because there’s two different sort of perspectives or incentives there.

[00:32:51] Paul Andreola: So we wanna know that somebody that’s been in the capital markets, ideally is sitting on the board and can sit there and say to the c e o, no, you don’t wanna do that, you don’t wanna do that kind of financing, you don’t wanna spend that kind of money on ir, you don’t wanna do those things, right?

[00:33:04] Paul Andreola: They’re doing it because they’ve got vested interest in making sure the company’s fine. So we constantly ask and try to determine who on that board has a meaningful stake in the business and has that experience to be able to tell that c e o, this is what you should do and this is what you shouldn’t do.

[00:33:20] Paul Andreola: And quite frankly, it goes for everything else on the board, right? You wanna find a board that has good rounded expertise that the CEO is gonna draw mentorship from or advice from. And without that, you question what that board is really doing. 

[00:33:33] Kyle Grieve: So I know that you’ve been a pretty concentrated investor in the past.

[00:33:37] Kyle Grieve: You discussed that you’ve had one stock make up to something like 60 to 70% of your portfolio at one time. May I ask what that name was and what are normal levels of concentration for you like today? 

[00:33:50] Paul Andreola: I had a number of ’em. So it’s not just one, but Expel was the example. Now, part of the problem is, and you wish this, because it w it didn’t start off as a 60, 70% piece of my portfolio, right?

[00:34:01] Paul Andreola: It grew into that. And when you have a company that’s going up 10, 20, 30 times in value like Expel did pretty quickly, it can be oversized position. I’m not a believer that you trim because it’s become a big percentage of our portfolio. You wanna constantly. Make sure that you got, that we gretzky on your, in your lineup.

[00:34:17] Paul Andreola: Right? And if you’ve got him, you put him on the ice as much as you can. You hold him as long as you can. And then when you see he’s he’s losing his edge, then maybe you take him off the ice a little bit. So that’s my approach. It’s always been my approach. I never ever at a starting position is never gonna be an outsized position.

[00:34:33] Paul Andreola: It’s gonna be a couple percentage points and they have to earn their weight in, right? So I could grow a position of maybe 10, 15%, but at that point, if it’s gonna get any bigger, it’s gonna get bigger because it’s just moved in size. Right. So that’s the makeup of my portfolio. I’m not afraid to concentrate.

[00:34:49] Paul Andreola: I tend to know these businesses better than almost anybody else. That part of what we do. And like I said, that confidence also comes from the fact that we’re constantly looking at everything else that’s available and we’re comparing it to everything else. So if it’s gone from that size, it’s usually because it’s just better than everything else we’ve, we see that’s available and we’re just not gonna sell it.

[00:35:07] Kyle Grieve: What are normal holding periods like for your stocks? Do you average up on when the opportunity set looks like it will be longer than when you first imagined? So for instance, let’s say you put in a full position by cost basis of, like you said, maybe 10 to 15%. If the business is just continuing, like maybe you observe that it has five more years of growth that you didn’t account for before, will you continue averaging up or do you set hard limits on that end of the portfolio management spectrum?

[00:35:36] Paul Andreola: I love averaging up. I love it. I love it. I love it. I’ve learned the hard way to love it. It so much of this is all through experience and what I’ve dealt with. So my biggest mistakes in the market have not been, Hey, I bought this stock and it went down. Now that’s normal. It helps everybody. And my biggest mistakes have always been, Hey, I’ve got this one stock and it’s going up, and why don’t I start selling it because it’s going higher and I’m making money.

[00:35:57] Paul Andreola: You know where I really learned this, the hard way is I had a company years and years ago called Boflex. And Boflex. If you’re old enough, you remember those exercise machines and you name it on tv, but it was a company that was growing very rapidly. It was an undiscovered company. I’d bought it around a dollar a share, and within about a year and a half it was, it had already 10 x.

[00:36:15] Paul Andreola: It was like 11, $12. And here I am thinking I’m a genius. I’m selling this because I’m up. Even though the company was still putting out the numbers, it was still very cheap based on its growth profile and I’m selling it, right? And this thing, eventually, I think after splits and everything it went about to 250, $300.

[00:36:32] Paul Andreola: I mean, it’s still around. It’s called Nautilus on the New York Stock Exchange. It was just a monster. So my mistake wasn’t sitting there and owning the stock. My mistake is actually how I held it and how I sold it, right? I should have been averaging up all the way. Instead of selling it all the way up, I should have been averaging it.

[00:36:46] Paul Andreola: So having learned that from so many situations, if you find a company that is fundamentally still proving out your thesis, that you can argue is still undiscovered and giving a margin of safety to what you think the valuation is, it’s telling you should keep buying it, right? Keep buying it until your thesis breaks or until you have something else that’s just egregiously more obvious than this one.

[00:37:06] Paul Andreola: So for me, I love averaging out because it’s a sign that businesses doing the right thing. It’s a sign that discovery process has at least started. And I’m comfortable owning these things for a very long period of time that they continue to perform. 

[00:37:20] Kyle Grieve: What are your normal holding periods like for your stocks?

[00:37:23] Kyle Grieve: Do you, I mean, obviously you’ll, it depends, I guess, right? There’s certain businesses where maybe you’re only looking for a two to three year opportunity, or maybe even shorter, but on average, how long would you say you like to both look for holding a stock, and how long do you actually end up holding stocks for?

[00:37:41] Paul Andreola: Well, first off, I’ll say my losers. I hold too long and my winners, I hold too short. If no matter what, if I hold the loser for a day, it’s too long. What I find is, look, I’ve got some socks that I’ve held for five or six years and I’m comfortable. I don’t set any kind of timeline target. It’s strictly a valuation target.

[00:37:59] Paul Andreola: And if anything, the most, or the reason I sell more times than anything else is because I found something that’s just a better opportunity, right? So that’s usually the driver of something. So I’ve got no problem holding stocks for five to 10 years, provided that I don’t find something that’s a better opportunity.

[00:38:14] Paul Andreola: So it’s rare. That after five or six years, I can’t find something that’s a better opportunity because if things are working, then that whole discovery process, which you know, we haven’t talked too much about, but you’ll understand what drives it. And our belief is that once a company’s fully discovered, you’re only gonna get the performance of the business rather than that discovery arbitrage that you can get.

[00:38:37] Kyle Grieve: So why don’t we dive into that discovery process in a little more detail. What specifically are you looking for in the discovery process that has helping you get these outsized returns and stocks that are trading not only at very low evaluations, but are also growing very fast. 

[00:38:56] Paul Andreola: So her belief, and I think it’s played out by a lot of the books we’ve read and even the experience that we’ve had, but stocks.

[00:39:04] Paul Andreola: Change in value based on how many people really come to understand that business. So some companies will toil in obscurity because there’s nothing that’s gonna trigger that discovery. They’re either not making enough money or they’re not exciting enough to get somebody interest in the stock.

[00:39:18] Paul Andreola: But from time to time, companies that are going to do very well, something will trigger a sort of initial level of discovery. So it could be a, an earning statement. It could be a newsletter writer, it could be somebody a company jumps on a podcast like yours and has a bigger audience. All of a sudden, more people find out about the business, and hence that larger audience is able to drive that share price.

[00:39:41] Paul Andreola: Right? When you understand that you’re understanding what. Really is the process that drives margin expansion or price earnings expansion or whatever valuation expansion you want to talk about. Why does a company like Expel, like when I found Expel, I was trading about eight times earnings and it was growing over a hundred percent a year, and yet now it’s at $80 plus and I think it trades around 40 times earnings and it’s growing actually slower.

[00:40:06] Paul Andreola: So what drove that? Well, everybody knows Expel now, whereas back when I looked at it, nobody really knew it. So, Understanding that process, I think gives you a massive edge and gives you that opportunity for that outsized gain. You gotta know what triggers these things. You gotta know how to determine if it’s triggered yet or not.

[00:40:26] Paul Andreola: If everybody’s talking about a stock, you know it’s discovered and more times than not, and you’ve seen it, right, and more times than not, the stock’s probably overpriced. But if nobody’s ever heard, if you go to 20 of your investing friends and say, Hey, have you ever heard A, B, C? And none of ’em say yes.

[00:40:39] Paul Andreola: That’s what gets me excited. One of the things we do is like, well, we actually finally decide to talk to management. We usually do a lot of work before we even talk to management. But if I phone a small micro cap and I ask for. It’s happened before I’ll phone the receptionist and say, I need to speak to whoever handles your investor relations, and if she has no idea what I just asked her, if she’s confused and doesn’t know who I’m supposed to talk to, I get excited because that means there’s not a lot of people that have phoned that company.

[00:41:05] Paul Andreola: It’s things like that drive our excitement. If all of a sudden she immediately hand me off to an investor relations expert or some outside party or something like that, then I know that. They tried to get people to hear about it or they’ve tried to get discovery and exposure, and I’m less interested in, I wanna find a company that’s not discovered.

[00:41:26] Paul Andreola: I wanna understand that. And quite frankly, if necessary, I’m gonna help that discovery process. I’m gonna phone institutional investors, I’m gonna phone other investors and say, Hey, you gotta look at this company. And that’s how it starts. 

[00:41:38] Kyle Grieve: So you mentioned earlier in this interview that with the fact that a lot of the stocks you invest in are illiquid, you have to be right a little bit more often than maybe say, investing in larger companies that are more liquid.

[00:41:50] Kyle Grieve: What would you say your hit rate? I. Is like with your strategy, do you find that your winners are following a power law and then you know you can find something like expel that carries the entire portfolio while you have maybe a few other stocks that aren’t necessarily losers, but maybe somes that just aren’t budging.

[00:42:06] Kyle Grieve: Maybe the discovery process just is taking a little bit longer than you thought, or maybe some of them, maybe you just make a mistake on ’em and lose some money on. 

[00:42:14] Paul Andreola: Yeah, so I don’t say the style or the strategy we use is very conservative. Inside the microcap space, there’s thousands and thousands of micro cabs.

[00:42:23] Paul Andreola: I think we did a check and only about 5% are actually profitable. So immediately we exiled that 95%. So we actually think because we’re doing that are odds of success are significantly higher. And then because we’re looking for that undiscovered component as well, we think that we shrunk that pool of viable businesses even better.

[00:42:43] Paul Andreola: And quite frankly our hit rate is actually quite high. I’d argue it’s probably in the 60, 70% range, which is I think if you’re hitting 50% in this business, you’re actually doing quite well, but we’ve hit higher. But that power law that you talk about still has that impact. Right. So our losers.

[00:43:00] Paul Andreola: Might be up 10 or 20%, but we’re not in the business to try to get 10 or 20% wins on these stocks. We’re looking for that outsize gain. So our hope is within that pool of companies that we have that five x or 20 X that we might see in three or four years, and we get those. And the thing is though, as we see those really start to take off, we wanna get, have less of those 10 and 20% gainers.

[00:43:20] Paul Andreola: And try to focus more on those Wayne Gretzkys. Again, like I said, so you do get that, you get an opportunity to see the big winners early. You get an opportunity to double down on ’em sooner than others, and that’s really where you gain, you’re going to get it because you’re gonna manage that winner properly as opposed to a diversified portfolio and hope and pray that two are gonna be big wins.

[00:43:39] Paul Andreola: You wanna really double down on the ones that you’re seeing, have that escape velocity. 

[00:43:44] Kyle Grieve: So looking at the other side of the discovery process is obviously the exit strategy that you have. So you’ve discussed quite a few little things that you look for when exiting, but what other things other than say things like once they get more discovered?

[00:43:59] Kyle Grieve: So are you looking for things like added institutional ownership, increased analyst coverage? What exactly are you looking for that’s gonna trigger you to exit an investment? 

[00:44:10] Paul Andreola: Yeah, selling is the hardest thing to do in this business, right? It’s easy to pick and choose a few stocks and help go up, but when it comes time to selling, especially.

[00:44:18] Paul Andreola: Like it, it’s selling a loser is pretty quick for us. Right. Once a thesis breaks down, it has nothing to do with discovery or not. If the thesis breaks down it’s time to head for the exit door. But the things that we look for that start to tell us when a company’s fully discovered is, like you mentioned, if an analyst starts to cover a company, it goes into a.

[00:44:36] Paul Andreola: Different level of discovery, right? There’s what we call retail discovery and then what we call institutional discovery. So when we start to see a number of analysts covering a stock, that’s mean we run for the hills, but it means we’re now into that secondary level of discovery when institutional investors start to participate.

[00:44:54] Paul Andreola: That’s another level of discovery. When you get that a hundred million dollar market cap and you’re getting those two things, the analysts and the institution starting to trigger, that’s another level of discovery. But then the other one that I’ve almost joked about is like when you start to see analysts on TV talking about this company, when you start to see institutional investors talking about this company on tv, that discovery process is gonna completely run.

[00:45:18] Paul Andreola: Now we’ve got a different dynamic in Canada because right now we’re just talking about Canadian sort of market. But sometimes these companies continue to grow and they go into the US and then you’ve got that whole different level of almost international discovery because now you started all over again.

[00:45:33] Paul Andreola: You’ve got a bigger pool of retail investors. You’ve got a bigger institutional pool that might start to look at a company. So again, like Expel expel graduated from a Canadian listing. To eventually a NASDAQ listing and all that time that while it was a Canadian listed company, it never had any analyst coverage.

[00:45:51] Paul Andreola: So you know, from like pennies to $8 roughly when it went to nasdaq, there was no analyst coverage. There was barely any institutional ownership. Right. It was bizarre. The minute it got to the US it just started to get discovered there. And of course I want 10 x from that point there. So. You have to understand the different phases.

[00:46:07] Paul Andreola: You have to understand where it could get caught up and say, okay, that’s about it’s never gonna go to nasdaq. It’s never gonna get that US audience, so this is as good as it gets. But I gotta be clear that if what you’ve done is once that discovery process has run its course, now you’re just left with the performance of the business.

[00:46:24] Paul Andreola: And while the performance of the business could be enough to still want you to hold the stock, You want both engines driving your returns. You want that discovery process and the fundamentals working. ’cause that’s when you’re gonna get your maximum output in that share price. So we’re looking for all those things, but one by itself doesn’t necessarily tell us, okay, it’s time to sell.

[00:46:43] Paul Andreola: If the company’s still growing very rapidly, if it’s still looks like it’s got good runway and there’s nothing else, that’s better, then we’re gonna still hold that stock. 

[00:46:52] Kyle Grieve: After investing in multi baggers that you look for so long, one of the biggest mistakes that Buffett always talks about is mistakes of omission.

[00:47:00] Kyle Grieve: So this is things like selling stocks that maybe are still early on in their growth trajectory or just missing something, letting, letting something fall through the cracks. So it sounds like your system is designed very specifically to not allow that to happen. But can you discuss if that has happened or if there’s something that was just looking back, seems so obvious, it just smacks you upside the head and you’re just like, oh my God, what, how did I miss this?

[00:47:28] Paul Andreola: Yeah. So we don’t have enough time to cover all the mistakes I’ve made of omission. That’s but I mean, I think if you’re gonna do what we do, if you’re gonna be in the micro account space, you better get used to the fact that you’re gonna miss a whole bunch of them. Right. And I remember I had an old mentor that told me one time, it’s like fishing right?

[00:47:43] Paul Andreola: At the end of the day, I. You’re trying to catch one big fish and be happy about it. You’re not sitting there in the river or lake trying to catch all the fish. You should be happy when you’ve got one big winner and that’s it. You’re gonna miss so many goodness. I’ve missed so many. I’ve sold too many big winners early.

[00:47:58] Paul Andreola: I. You just gotta get used to that. And if you’re fishing in the right spot, you’re gonna want to hope to have said, okay, I saw that, but I missed it, rather than, I never saw it. I’ve had in my hands, like almost crying about this, but in my hands I’ve had probably half a dozen, a hundred bangers.

[00:48:14] Paul Andreola: Like I’ve. Own these things and sold far too early. That’s just the nature of how we the criteria we have will identify them or identify most of them, but it’s just impossible to own ’em all, and it’s impossible to time it right, and it’s impossible to hold them to the maximum ownership. Right.

[00:48:30] Paul Andreola: These are just, you just gotta get used to the fact that’s gonna happen. Like you’re not gonna, again, I’ll use a hockey analogy. You’re not gonna hit every shot and score every shot. You just gotta keep taking shots and hope that the odd one gets in. 

[00:48:42] Kyle Grieve: Yeah, it seems like making those mistakes of omission is part of the investing process, and you basically just have to accept that it’s a price that you pay for success.

[00:48:53] Paul Andreola: Absolutely, because we know every stock in Canada, right? We’ve looked at every stock. We have to know that we’re gonna miss something. That’s just, that’s what’s gonna happen. So 

[00:49:03] Kyle Grieve: other than Expel, what are some of the biggest winners in terms of returns that you’ve ever invested in? Obviously aside from these half dozen, a hundred beggers that you let go early, although maybe some of those probably were ones that were big winners for you.

[00:49:19] Paul Andreola: Okay, so Boflex was a big win. I mean, I can’t say no to 10 12 x a return. That was a good size win and it was early, so that was really helpful. But there, there’s a lot of micro calves that people have probably never heard of that are like, they were 10 Xers for me and I was able to compound a lot of these things.

[00:49:35] Paul Andreola: So a company called Sanco Tech was a 10 x, nobody’s ever heard of that. Still Hamilton Thorn, which is now quite institutionally owned and is a great example of discovery process. That was a 15 x for us, so that was a sizable one. So Boflex Mifa was a US listed company. That’s one of those a hundred baggers that slipped through my fingers.

[00:49:55] Paul Andreola: We were buying it in the 20 cent level, I think after splits. That’s become a hundred dollars plus stock. Oh my gosh. There’s so many of these. 10, 20 baggers that, that we have, that they’re still unknown. We recently had one called Invents that’s turned into a 10 bagger for us. I can give you a massive list there.

[00:50:13] Paul Andreola: There’s a lot of these things, but they’re still relatively unknown. These micro caps that turned into slightly bigger micro caps, but are 10, 20 times our original money. So 

[00:50:23] Kyle Grieve: you mentioned in another interview about Expel being an American company that listed in Canada because they wanted to take advantage of going public over raising capital from venture capital.

[00:50:34] Kyle Grieve: How do you see the VC market shaping in the last few years in relation to smaller businesses looking to raise capital, both in the US and in Canada? Are there still businesses like Expel that are US based listing in Canada or has that kind of ship sailed? 

[00:50:50] Paul Andreola: So I actually have done work with the TSX Venture Exchange and have gone to the US and presented on behalf of the exchange to try to encourage more and more companies to do this.

[00:50:59] Paul Andreola: Yes, there’s more and more companies that are looking at Canada and the Canadian exchanges for their capital requirements. The venture capital market, the US and even in Canada, they’re really trying to find that one outlier, that unicorn that company that is going to be that power driver of their portfolio.

[00:51:19] Paul Andreola: The next Uber and LinkedIn and whatnot. And so if a company looks like they’re just gonna be an average business, they don’t have the same access to capital that a company would if they took that average business and tried to list up in Canada. So I think more and more people are starting to understand that we’re starting to see more US companies that come and list up here.

[00:51:37] Paul Andreola: Like I mentioned another another big winner for us was Hamilton. Thorne. Well, Hamilton Thorne is a Boston based business that listed up here in Canada. We’re seeing a number of others like that. That are seeing the opportunity to access capital appear at an earlier stage in some cases, and are, you know it, the venture capital market or the microcap market in Canada is a viable opportunity for some of these businesses to get capital that they need to grow, and it’s structured so that they can do it in a more cost effective way than a lot of other opportunities.

[00:52:06] Paul Andreola: So, yeah, I think we’re gonna, we’re seeing it and I think we’ll continue to see not just us listed companies, but international companies that are coming up here and listing and going through all the trials and tribulations that Canadian companies do when they’re startups. And at this stage as a public company, 

[00:52:23] Kyle Grieve: can you name any interesting companies that you’ve recently invested in or that are maybe on the c r that are starting to interest you?

[00:52:31] Kyle Grieve: Anything new?

[00:52:33] Paul Andreola: I mean, there’s always something. We’re not fad chasers, right? So we miss a lot of the big bubbles and stuff like that. But surprisingly, like cannabis is a great example right now. We completely miss the cannabis craze because we’re all, we’re driven by fundamentals, right? And there was no fundamentals to, to get us excited.

[00:52:50] Paul Andreola: Now it’s come full circle and surprisingly, we’re starting to see some cannabis names that are starting to turn profitable and are we think significantly mispriced, misunderstood, and almost hated because they’re in that industry. So there’s a company called Cannabis Capital. I mean, they’ve got some of the strangest names of that industry, but Cannabis capital is one we really like.

[00:53:10] Paul Andreola: There’s one called Grown Row that’s actually a US listed or a US based company that’s come up here in Canada and like, like we just talked about, List it up here. These are two companies we’re looking at right now because they fill our sort of fundamental criteria. They’ve got that inflection point. But here’s the thing, nobody knows these guys.

[00:53:28] Paul Andreola: I actually had lunch with a cannabis analyst two weeks ago, three weeks ago, and he’d never heard of these two companies, right? So the discovery process really kicked in when I heard that, right? So you’ve got these two companies that are profitable and growing nicely, very unloved the sector that they’re in, and very unknown.

[00:53:46] Paul Andreola: So hit a lot of the things we’re looking for. So there’s that. There’s a company that I recently joined the board of. That sort of fiddle the criteria. I won’t mention the name as, there’s a bit of a conflict there, but there’s a number of different companies that we’re finding, gosh, Hammond Power or Hammond Manufacturing.

[00:54:04] Paul Andreola: These are two names that have done exceedingly well. Those are companies that we’ve been following now for a while. Yeah, I mean, it’s almost like you ask me next week. I’ll have a few more names. There’s always something that, that gets us interest enough to start looking. We do have a new name that we’re looking at right now again.

[00:54:19] Paul Andreola: If they meet the criteria we look for, they start to trigger that. Or if we see that inflection point we get excited about and off we go. There’s lots out there. There’s lots out there. 

[00:54:28] Kyle Grieve: Paul, thank you so much for joining me today. Before we close out the episode, where can the audience connect with you and learn more about you?

[00:54:35] Paul Andreola: 

[00:54:35] Paul Andreola: Thank you Kyle. First off, I wanna really appreciate the time that you’ve given me. If anybody’s interested in talking to me, they can find me on Twitter @PaulAndreola. They can check out our website at smallcapdiscoveries.com. And yeah, I mean it’s easy. Track me down Google, search me. You’ll find all sorts of different ways to connect with me.

[00:54:52] Paul Andreola: But our website, or even if you wanna reach out to me via email, it’s atPaul@brazil.com. So hopefully that gives everybody enough opportunity to track me now. 

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