There must be some satisfaction in knowing you saw something promising first. Returning to the nature of the micro and small cap mar- ket and our usual focus on innovation, surely – though this is hard to quantify – there is a lot of energy, entrepreneurialism, new creation in this space? Certainly. These companies have to innovate, they must be competitive. Looking at the sort of socio-economic view you are implying – I would say a couple of things, which are a little more from the viewpoint of the investor. What is inter- esting is the ability of these companies to take market share, a key indicator for me. Generally they do and this attracts Private Equity. And the other? It’s an attribute that is maybe not talked about much. But you can observe it. These compa- nies can produce growth which is endogenous – I mean it comes from within, more or less un- influenced by the exogenous factors, the exter- nals, the market conditions. It’s not, of course, unlimited, but it is real and an aspect of the small innovative company I find fascinating.
investing. You cannot make 1000% in 2 years. There are some, perhaps many who equate ease of making money in moving in and out of assets, but this is wrong. Good assets will prevail time after time. Nobody actually knows when the market is going to be up or down, in a short or annual time frame. But if you have a long-term view and a solid growth asset, you will win. What has changed in investing as you do in the past, say, 15 years? Different revenue models come and go, there are some new methods of applying valuations but the basics have not changed vastly. Cash flow remains of course a predominant criteri- on. Perhaps the biggest alteration is in the vari- ety and differences of business models, and the forecasting requirements this inherently cre- ates. It makes our processes somewhat harder, and it can result in a higher discount factor. I believe the increase in Private Equity activity has had a salutary effect on your investments? Well, yes and no. Of course, when Private Equity enters, a premium is often paid, and we make a profit, but if you have our long-term view, you realize that the value after our exit will almost inevitably have been greater, in some cases much greater. “Perhaps the biggest alteration is in the variety and differences of business models, and the forecasting requirements this inherently creates.”
https://youtu.be/6dUksy- CQvw0?si=8MK6lp85pRLt- 4Wfw
Carlos Gil, explains the investment philosophy behind Microequities small-cap investing.
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INNOVATIA
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