Alpha Through Quality Focus

33 stock multibaggers and counting. Focusing On High-quality research is our key to generating ongoing alpha.

The MSMqi: The only microcap index that combines quality and multibagger markers

Since its launch in February 2022, our MS Microcap Quality Index (MSMqi) has consistently been crushing all major comparable equity indexes. Imagine having invested in the stocks that produced this alpha shown in the graph below.

Note that the superior returns of MSMqi were achieved without removing out-of-favor companies from the Index or by “timing” the market. NO BEHAVIORAL BIAS.

The MSMqi gives you access to deep, yet quick research through our Cliff Notes, which explains why we added a stock to the index. For each stock, we also provide tasks for ongoing research needed to keep you ahead of the curve. Plus, we spotlight the most promising stocks from the index, guiding you toward high-potential opportunities.

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Cliff Notes: Concise Research Summaries

Every time we add a stock to our MSMqi index, we publish a clear and concise Cliff Note. These notes outline the main reasons for the inclusion of a stock in the index and its potential risks. Our detailed approach to research helps us identify highly promising companies that may not yet be on every investor's radar. Think of our Cliff Notes as an enhanced, modern-day version of a Standard & Poor’s tear sheet or the Value Line, but with deeper analysis and a larger focus on microcaps.

Cliff Notes: A Hands-On Learning Tool

Additionally, each Cliff Note includes specific research tasks that our team will undertake to continue validating our decision. We list these tasks for MSMqi subscribers who want to investigate further, making our Cliff Notes a practical learning tool. This setup allows users to improve their research skills and provides a firsthand look at how professionals approach stock selection for a portfolio. This method is especially beneficial for beginners eager to understand how professionals approach stock research and analysis. It’s equally beneficial to professionals by speeding up the research discovery process.

Spotlights: Maximizing Returns with Our Top-Picked Stocks

Right now, 97 stocks make up the MSMqi and on average we add three new stocks per month. However, we realize that some stocks just end up being better than others. That's why we routinely review the index to highlight ONE specific stock from the MSMqi, where we have the highest conviction for short and long-term price appreciation.

So far, since we launched this “Spotlight” mini index concept in April 2024, the average return over the first five stocks is 29.26%, as of 8/17/2024. The June Spotlight was acquired in July at a 70% premium to the price when we added the stock to the MSMqi in 2024. Our July Spotlight was up 36% five days later (in one day), fueled by a strong earnings report and a special dividend announcement. Our just released August Spotlight is already up 17%.

I’m not highlighting these returns to boast, I am relaying these stats because it shows what happens when you match quality with multibagger markers. Here is the alpha that our Spotlights have generated over the major stock market indexes as of August 17, 2024:

We're planning to generate even more alpha by introducing additional mini-indexes.

Coming soon - The Dividend MSMqi.

Microcaps give you a first-mover advantage

Our approach to building the MSMqi is simple and straightforward. There are about 10,000 microcap stocks in North America. We reduce the microcap universe down to about 1000 stocks using a 10-point set of qualitative and quantitative quality criteria. These stocks either have to meet the majority of these quality factors or if they don’t, we’ve determined that they are moving in that direction. From this list, we are constantly searching for stocks that meet our list of multi-bagger characteristics. These end up being the stocks that we add to the MSMqi.

This approach is particularly effective in the microcap space, where fewer investors are competing for opportunities. It grants us a significant first-mover advantage. Additionally, unlike large companies like Apple or Microsoft, where access to management is limited to THE Wall Street ELITE, in the microcap space, you can directly interact with company management. I know this because I have interviewed hundreds of microcap management teams throughout my 30+ year investing career.

Also, imagine being one of the few investors on an earnings conference call, asking questions and gathering insights before the rest of the market even notices. A prime example of this advantage is the case of a recent $TSSI earnings call. During the live call, I asked the CEO key questions that uncovered crucial information that the market had not reacted to for days.

This stock eventually became the best performer in our MSMqi, up 290% in just a few weeks. If you had been an MSMqi subscriber, you could have bought the stock before it rose after being privy to the information from the earnings call that we made sure to summarize for our subscribers. As of this writing, TSSI is up over 700% from when it was added to the MSMqi

To give the index a little bit of extra alpha, we also search for high-probability turnaround companies. These companies are often ignored by investors because they may seem complicated to analyze or are losing money. So, on paper, they don’t look that great, but with a little research, we are able to find easy-to-understand companies that are right on the doorstep of their turnarounds producing positive results on their balance sheets and income statements. 

A big part of our advantage is derived from going beyond press releases, which is where many investors stop their research. We dive deep into other sources where information is hidden and less investors are searching. We aim to secure the first-mover microcap advantage.

Quite simply, our strategy gives you access to great smaller-cap companies before they become popular and other investors notice.

The facts demonstrate that our strategy is working:

• 70% of the stocks in the MSMqi are up.

• At the end of July, the average return of the portfolio was 59.30%.

• Every third stock reached multi-bagger status.

• 52% of the 96 stocks in the MSMqi have been up at least 50% at one point in time

• 77% of the stocks have been up at least 20% at one point in time.

• 7 stocks have already been acquired or are in the process of being acquired.

• The average peak return has reached 104%.

• The average time for a multi-bagger in the MSMqi to at least double has been 10 Months.

How to use MS Cliff Note Substack

Our Substack provides benefits for various use cases, serving different investing needs:

1. Discovery. Our platform helps you quickly find and review small-cap, microcap and nanocap — stocks that might fit well in your portfolio. We offer a list of 96 (AND GROWING) top-quality stocks, HITTING MULTIBAGGER MARKERS, to make finding great investment options faster and easier.

2. Time-Saving. If you're busy and don't have much time to research, our Spotlight Stocks and mini indexes are perfect for you. They show you our highest conviction investment ideas, helping you make quick and informed decisions.

3. Education. If you want to get better at developing a research process and at choosing the right stocks, you can learn by watching how we do it. We share the important qualities that consistently lead to multibaggers, which can help you improve your own investment choices.

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Testimonials

Hear about our performance directly from our clients' testimonials.

Encouragement from investors like you motivates us to keep improving what we are creating. Welcome to the MSMqi!

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