When Everyone’s Running, We’re Hunting
Let facts and our quality stock index (MSMqi) be your guide
Well, the title of this article should have been,
“When Everyone’s Running, We’re NOT Just Hunting, We’re Smiling.”
Our team is working hard at finding companies that are falling for all the wrong reasons because of the tariff-induced pullback.
We’re combining the 110 stocks in our MS Microcap Quality Index (MSMqi) and new stocks, one by one, to see if we can buy some really nice stocks at really cheap prices.
We’ve already identified five high-quality and profitable stocks, which I’ll talk about in a follow-up post.
The nice thing about starting the MSMqi over three years ago is that each stock in the index is accompanied by research, so we can all easily reference the research notes to help assess tariff risk.
Being A Smart Investor Is Easier Said Than Done
Smaller-cap stocks have been rattled in Q1 2025. The iShares Microcap ETF has been the hardest, down 22% for the year. Many microcaps we follow are being dumped with no regard for quality, profitability, or trajectory.
It’s easy to tell yourself you won’t panic sell during market pullbacks because you “know” you own “good” stocks and that you are a “long-term” investor.
But when shit hits the fan, even some of the most disciplined investors I’ve chatted with start second-guessing what they own.
So, I guess, the good news is that we’re not alone!
I have had moments of fucked up clarity throughout my entire investing journey, from the 1998 currency crisis, to the .com bubble, to 9/11, the 2008 global financial crisis, COVID and the 2022 inflation reset correction.
Buy The Fear
Anyway, a lot of us have seen this movie before. And we know what to do.
Buy the fear. Not recklessly — but with intent.
Because buried in these moments are companies we’ve followed for years. Companies with clean balance sheets, expanding margins, loyal customers, where many have proven they can adapt to the changes… even if it meant suffering temporary setbacks in their businesses.
Even more exciting: Some of these companies are quietly crossing over from turnaround mode into growth mode — hitting the early stages of what we call a “high-probability turnarounds.” These companies can get hit the most during market swoons.
If you have the stomach to act while others are feeling paralyzed, these are the kind of setups that will produce alpha months from now and will look obvious in hindsight.
Let History And Facts Be Your Guide
Large market pullbacks aren’t new. And they’re always uncomfortable, but they’ve also been the starting point for major generational buying opportunities. And let’s be frank, making outsized money in the stock market should be uncomfortable.
It’s that uncomfortableness that forces some people to not invest in a potential multibagger. We all have that friend or family member who wants you to give them five stocks to double their money without taking risks.
Here's a quick reminder of what fear has looked like — and how quickly fortunes flipped:
2008–09 (Financial Crisis): S&P 500 down 57% — but fully recovered in 49 months, and small-caps bounced back even faster.
2020 (COVID Crash): S&P fell 34% in 33 days — recovered in 5 months. Many small and micro-caps 3x–10x’d within 12 months.
2011 (Debt Ceiling): Down 19% — back to new highs in under 6 months.
2018 (Q4 Meltdown): S&P dropped 20% in 3 months — recovered fully by April.
2000–2002 (Dot-Com Bust): The worst for unprofitable growth stocks — but small, profitable, profitable “boring” companies quietly outperformed during recovery years.
On average, markets have historically taken about 2 years to recover from significant drawdowns (although this can vary from 10 years to just a couple of months) — but the best-performing stocks often bottomed and bounced far earlier.
I remember back in the 2008 crisis, my portfolio fell about 65% in a matter of days, and then was up close to 300% over the next 12 months.
Why This Tariff Pullback Is a Gift for Microcap Investors
A big part of the reason that we created the MS Microcap Index (MSMqi) was to create a fertile ground to search for quality companies and high probability turnarounds in the microcap universe that we can all hunt in when markets are falling.
This current selloff, driven by tariff tensions, reshoring policies, and inflation fears, could be good for small companies, many of which are small caps and micro caps
Why?
Many of our high-quality smaller companies aren’t reliant on China, global supply chains, or imported components — they’re made-in-America operators.
Big global firms with overseas exposure take the brunt. Smaller firms benefit from onshoring, buy American contracts and localized supply chains. They can also be more nimble and make changes more quickly.
Many quality microcaps are now trading at absurd valuations, even below net cash, or at 5–7x earnings, despite growing earnings.
I’ve already found about 700 stocks trading at low cash per share valuations that our team is going through.
This isn’t about being blindly bullish. It’s about understanding that fear is cyclical, and opportunity is disguised as discomfort.
Over the next few days, I’ll be sharing my thoughts with our paying subscribers on some of the stocks in the MSMqi best positioned to benefit from the tariff drama or that are not negatively impacted.
The MSMqi produced over 40 multibaggers during the last three years, out of 110 stocks. Now we’re looking for the next 50!