Small Cap Discoveries Editor Paul Andreola joins “The Ten Baggers” to discuss how his team is able to identify winners before they make their biggest moves.
You can read the full article at http://bit.ly/Paul-talks-stocks
James West: Paul, thanks for joining us today.
Paul Andreola: Thanks, James. Happy to be here.
James West: So Paul, you produce a newsletter called Small Cap Discoveries at SmallCapDiscoveries.com.
Why don’t you give me an overview of what the value proposition is of that newsletter for subscribers, and an overview of your investing style?
Paul Andreola: So there’s a discovery process that we recognized that happens to all our stocks.
So what we try to do is, we try to identify companies before they pass that discovery process, and part of that could be a set of earnings, or some catalyst that has happened within the company, maybe a discovery in a biotech approval, something like that.
We’re constantly looking for deals that have that possibility of those catalysts.
Now, what we typically do is, we find using a bottoms up approach, companies that are growing and establishing trends in their financial numbers.
We don’t participate in the resource sector; we’re strictly non-resource.
We go through every SEDAR filing in Canada almost on a daily basis, you know, SEDAR’s financial filings, and we screen out all the non-resource companies, and we look for companies that are showing very significant growth in both earnings and revenues.
And so we’re trying to find the best companies, the fastest-growing companies, and then we’ll sort of review them and, based on a valuation model of views, we try to screen out the fastest-growing companies that are offering the best prices, and we try to do it before the industry discovers them.
Hence the name ‘Small Cap Discoveries’.
James West: I see. So you read all the SEDAR financial statements?
Paul Andreola: Yeah. I’ve got a partner named Brandon Mackie that I work with, so between the two of us, what we do every day is review all the filings, again, all the quarterly and annual statements that come out, and sometimes there can be quite a few of them. so we manually screen them, looking for the criteria we look for, and every now and then we’ll find one or two that meet our criteria, and then the real due diligence starts.
At that point we’ll interview management, we’ll do some industry analysis, and look at things like share structure and what the ownership position with the management, how they purchase their shares, what other kind of significant shareholders are involved.
A lot of times we find that it’s important to find out the quality of the shareholders to see if there’s any significant sort of movers in the industry that are participating, and if it meets all our criteria or pretty close to all our criteria, we look at writing up a report and sending it to our subscribers.
James West: Mm-hmm.
Ed Milewski: Paul, it wasn’t so long ago, you and I were having lunch at the National Club and I was telling you about Lingo Media, and we went over there and we had a very good conversation with the founder, and this is probably the kind of company where it’s been around for a long time and the stock’s not doing anything, it’s off-radar, and all of a sudden you find out that lo and behold, it looks like they’re going to get an earnings bump.
This is the kind of thing you’re talking about, right?
To read the rest of the interviedw go to: http://bit.ly/Paul-talks-stocks