Misfit Entrepreneur June 2022 - 307: Go Where Others Can’t or Won’t, How to Maximize a Niche with Microcap Millionaire, Mariusz Skonieczny

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Dave Lukas Chats with Mariusz Skonieczny

307: Go Where Others Can’t or Won’t, How to Maximize a Niche with Microcap Millionaire, Mariusz Skonieczny

This week’s Misfit Entrepreneur is Mariusz Skonieczny. Mariusz is the founder of MicroCap Explosions and the author of 11 books on the subject of investing. Mariusz has carved out a unique niche investing in microcap companies where the institutions don’t play, and the retail investors don’t focus. And it’s very lucrative. Over the course of a decade Mariusz personally turned $10k into over $7 million investing in Microcaps and now he teaches others to do what he does.

I’ve always loved exploring unique niches with the entrepreneurs that find and maximize them, and I’m excited for Mariusz to share his journey and more about the Microcap niche with you in this episode.

Mariusz Skonieczny on YouTube

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Show Notes

Mariusz philosophy is to go where others can’t go or don’t want to go. You have to be very picky about where you are going to be competitive and look for the best place where you can have an edge. Mariusz was born in Poland and grew up there focused on sports. He came to the US in his late teens and wanted to play basketball. He was not good enough and it broke his heart. He was not competitive enough…not to mention he could hardly speak English. This experience led him to discover and look for unique niches that don’t have a lot of competition.

He gravitated toward investing. At first, he did what most people do and invested in blue chip stocks. As he found, if you do what everyone else does, it doesn’t pay that well. He then heard an interview with Warren Buffett where Warren talked about how investors need to look for unique opportunities that other investors don’t or won’t invest in and that set him on the path to do what he does now in the microcap space.

What is a microcap investment?

Companies that have market capitalization of less than $200 million. These are companies in which all the shares outstanding multiplied by the price are less than $200 million.
Most of the time, these companies’ stocks trade less than $5. Some of them get a negative connotation of being “penny stocks.”
What matters is the business behind them and that is the key – if there is a good business behind that has a path to grow, then it can offer a good opportunity.
These companies are publicly traded, but usually on secondary exchanges such as Toronto or OTC. There is less competition there as well.
A lot of the companies “grow up” on these exchanges and then move over to the larger ones like the Nasdaq, etc.

How do you find a microcap opportunity?

You can find them on stock screeners, but Mariusz goes to an exchange like the Canadian Stock exchange that has 700 companies and spends the time to evaluate each one to find the best.
80-90% are not great companies.
He will whittle it down to the top 50 or so, then find the top 10% out of those and then do full diligence to decide the best one.
He’s willing to do the work where others don’t.

What are the criteria you look for in a microcap?

Don’t invest in trash companies! Find the diamond with high quality revenue.
Recurring revenue is critical.
The business model offering should have high switching costs meaning it is hard for a client to drop the offering.
The business should have high margin revenues with gross profit margins above 50%.
The business should also have a long runway and growth trajectory.

How do you predict the success and growth rate of an opportunity?

Each business will be different.
An example is Voxster which focuses on the real estate industry.

At the 17 min mark, Mariusz discussed Voxster’s business model and how he evaluated the company to invest in it.

How do you manage risk?

The best thing you can do to manage risk is to invest quality companies with proven business models and profitability.
You must also not overpay for them.
Most companies are too expensive.
You must have patience and be selective.

How do you determine value, so you don’t overpay?

You can look at multiples of revenue or income.
With smaller companies, net income is not the best way because they grow faster and sacrifice profitability by investing it back into the company for the growth.
1-3x revenue is a good rule of thumb when it comes to the stock price and how it is trading.

How do you stay in an investment?

Years – typically 5-6
If you are a businessperson or entrepreneur, you know it takes time to grow.
Play the long game.

Anything else we should know about microcaps?

You must have patience.
You must have tolerance for volatility.
You can get homeruns if you don’t overpay.

What other lessons have you learned on your entrepreneur journey?

If you see a problem, don’t wait for others to solve – see if you can be the one to do it.
Or look for companies that solve problems and become part of the journey by investing in them.

Best Quote

If you see a problem, don’t wait for others to solve it – see if you can be the one to do it.

Think independently.

You don’t need others’ approval to do what it is you want to do in business or investing.

Do not worry about what others think.

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Misfits, you’ve heard me talk about my trading and investing many times. I’ve been in the game for almost 20 years and have taught thousands of students all over the world my strategies. One thing I have always looked for are trends that are a good opportunity for investors.

Recently, I was introduced to an opportunity that may be positioned very well for the times we are in, especially in a rising rate environment with talk of recession making stock and bond markets more volatile. In fact, after some research, I saw that the largest investment firm in the world, Blackrock, who manages almost $20 Trillion is invested in it. The company is called Goldmining Inc, ticker symbol GLDG.

GLDG operates gold mining operations throughout the world and was smart to purchase its gold resources during the recession for pennies on the dollar. In fact, the company owns the equivalent of 32 million ounces of gold at an average cost to them of $4.30 per ounce. As a comparison, similar deals at the same time were closing at an average of $50 per ounce! Now, with gold approaching all-time highs, GLDG is poised to reap the benefits.

I’ve always loved gold as a store of value and a hedge against inflation and have traded many companies like GLDG who have appreciated hundreds of percent. While no one can guarantee that will happen with GLDG and I am not giving your financial advice (you should consult with your financial adviser), I do see great opportunity for the company and the fact that Blackrock is involved tells me I am not alone. Analysts are currently saying the company is undervalued and has tremendous upside potential.

To learn more about Goldmining Inc. and stay up to date with the company’s success, go to www.GLDGnews.com and search the ticker symbol GLDG wherever stocks are found. Consult your financial adviser and check out GLDG today!