Good morning my dear readers,

I often used to wonder, what is the 'right formula' for someone who wants to go for wealth creation?

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1- Right off the bat, the first thing that came to mind was, 'the base should be small'.

(Basically, Smallcaps is the place to be for wealth creation).

Why?

Simple, two big reasons.

A) High growth potential 📈 compared to matured large companies.

B) Much lower stock coverage, contributing to lower valuations for us.

*There is a saying, all legendary investors were smallcap hunters originally until their portfolios became so big that they were forcefully unable to operate in smallcap space.

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2- Good Promoter.

Man, a growth smallcap with a honest and capable founder is like a dream alliance.

What type of promoters should we look for?

There are many ideas like Immigrants, First Generation people who come from very little means etc.

But my absolute favourite type of promoter is the one who has worked all his life for others and built excellent businesses but now after decades as an employee now has become a founder himself and wants to create wealth for himself.

(Tons of winning examples on the above point).

(This is where my experience in special situations comes in handy. 'Promoter Change' is one of my favourite special situations especially when a management does a buyout of a business).

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3- A little bit of Good Luck 🤞.

This ranges from god's grace like good health and safety from freak things and also good luck that freak events don't happen with your high conviction stocks.

Humility and Good Deeds are important.

(This chapter is a bit of Gyan, which no one likes I know. But most legendary investors are/were extremely humble).

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Conclusion: I know we cannot do much about good/bad luck.

But Smallcaps with growth potential & good promoters, for sure, some systems and processes can be built which suit your own risk profile and investment parameters.

Because, if wealth creation is something you wish for, above two are important ingredients.

Risk: Smallcaps mean you also take more risk compared to much larger companies. Need to understand your risk profile and then decide.

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That is all from me today folks.

We will discuss about some new emerging sectors next time. See you soon.

My Best,

Neil Bahal

Founder

Negen Capital

Ps: Did you know?

FIFA Women's World Cup prize money:

2023: $110 million

2019: $30 million

2015: $15 million

2011: $10 million

2007: $6 million

For the first four editions of the tournament ('91, '95, '99, '03) there wasn't any prize money awarded 😳.