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When I first started the Capital Compounders Club (https://www.facebook.com/groups/capitalcompoundersclub), I promised to post DIY investing stories on our very own members. My philosophy; the more you learn (from others), the more you earn….

So, first up is club member Philippe Bergeron-Bélanger, who’s been a full time investor since August, 2014. Philippe lives in Montreal (I love that city), and also runs a free investment blog called Espace MicroCaps with Mathieu Martin (another club member) where they both share their top investment ideas and educational articles about microcap investing.

Philippe’s returns have been great; he says his capital has gone up 8x since 2014. And he’s only 30.

I’ve posted below the Q&A style interview with Philippe. There’s lots of great info on micro-cap investing, including Philippe’s micro-cap criteria, current holdings, and his favourite non-mainstream book pick (it’s on my reading list now).

Read on…

DIY Investor Feature – Philippe Bergeron-Bélanger

Age:

30 years old

Occupation:

Full-time investor since August 2014

City:

Montreal

Website/blog/Seeking Alpha Reports:

I run a free investment blog called Espace MicroCaps with Mathieu Martin where we share our top investment ideas and educational articles about microcap investing. We also organize networking events at Bier Markt Montreal with speakers and companies in the space. Our message board has over 300 members and is the only French one in North America with a focus on microcaps.

Short Bio:

I have a background in finance and accounting. Out of university, I started to work at Travelers as a surety underwriter. One of my colleague there introduced me to microcaps and my first two investments went up multiple times my invested capital. Needless to say, I was hooked. In August 2014, I decided to quit my job to become a full-time microcap investor. I never looked back.

Investing Style and Influences:

Interestingly, I have made some money playing poker while studying at university. It taught me the importance of having sound decision-making processes and the discipline to stick to them. It helped me detach myself emotionally from money, and start thinking in terms of risks, rewards and expected returns. As an investor, our goal should be to maximize potential return “per unit of risk”. Some prefer to minimize downside first, think “margin and safety” and then find the best investment opportunities for that say level of risk. Some prefer to focus on potential return only. I’m more a student of the former than the latter. Influences: Ian Cassel (MicroCapClub) and Paul Andreola (Smallcap Discoveries) had the greatest impact on my investing style.

Investing Strategies:

I run a concentrated portfolio of Canadian microcaps. My goal is to find undervalued and undiscovered equities that have the potential to at least double my money on a 3 years timeframe. In a nutshell, I look for mispriced growth stocks because I can make money in two ways: 1) Expansion of valuation multiple and 2) Growing revenues and EPS.

Stock Selection Process:

I look for growth businesses that present the following attributes and/or have the potential to show them in a relatively short timeframe: High gross margins and/or high asset turnover, operating leverage (expanding GM% and EBITDAS%), cash flow positive from operations, positive Working Capital, tight capital structure with minimal to no debt, low dilution risk from options and warrants, high insider ownership (ideally a founder-operated business), low institutional ownership, no analyst coverage, low customer concentration risk, some sort of niche competitive advantages and/or intellectual property, etc. I don’t tend to put a lot of weight on past performance as most microcaps are too early stage or have struggled for years before showing glimpses of hope. If they were solid businesses, they wouldn’t be microcaps after all. In other words, I can get comfortable with only a few quarters of sound financial performance if I pay a reasonable-to-cheap price given the growth potential of the company. Note that I don’t invest in resource or financial companies.

Risk Management:

The best risk-mitigating activity is to do a lot more research than anyone else. You want to get an informational edge on other investors before investing and AFTER. You need to follow your positions closely.

Biggest Wins/Losses:

Wins –

Lite Access Technologies Inc. (LTE.v) – in at 0.25$, still holding

Pioneering Technology Corp (PTE.v) – in at 0.125$, still holding

Biosyent Inc. (RX.v) – in at 1.50$ and sold at 9.50$ in 15 months

Losses –

Ackroo Inc. (AKR.v) – in at an average cost of 0.085$, still holding

MicrobixBiosystems Inc. – in at 0.40$ and sold at 0.22$

Portfolio (Current holdings)

• Imaflex Inc. (IFX.v)
• Lite Access Technologies Inc. (LTE.v)
• Ackroo Inc. (AKR.v)
• Pioneering Technology Corp (PTE.v)
• Namsys Inc. (CTZ.v)
• ImmunoPrecise Antibodies Ltd (IPA.v)
• Siyata Mobile Inc. (SIM.v)
• Aurora Solar Technologies Inc. (ACU.v)
• CovalonTechnologies Ltd. (COV.v)
• GatekeeperSystems Inc. (GSI.v)
• RenoWorksSoftware Inc. (RW.v)

Annual Returns:

My TFSA is a good indicator of my past performance. I’ve been investing for 4 years now and my capital has gone up 8x.

Advice and Outlook:

1) Companies that are dominating a niche tend to do better than those chasing large opportunities. They run a profitable business in their niche and can reinvest profits to expand their TAM.

2) Turn off the noise, stop listening to mainstream media and focus on finding companies that should do well in any macro environment. Remember that the price you pay is your margin of safety.

3) Don’t use leverage. If it’s not good for the companies you invest in, it shouldn’t be good for you either.

A great investing book you’ve read that isn’t mainstream:

Insider Buy Superstocks: The Super Laws of How I Turned $46K into $6.8 Million (14,972%) in 28 Months by Jesse Stine