Welcome,
this is the third part of my Investment Process series. If you haven’t read the first two parts, you should probably start with these first. In part 1, I wrote about Idea generation. How do I find new Investment Ideas & what tools do I use for this process:
In part 2, I described how I filter all these ideas and how I try to avoid “FOMO” with my “Quick-List” approach:
In this part, I will focus on the deeper research part that follows after I put a company on the “Quick-List” and that definitely takes most of my time as an Investor. As always when I write in the “Investment Strategy” section of this substack, it is a more personal write-up. So keep in mind that the process is not perfect, it just currently works for me. I’m constantly learning and thus my process also evolves.
Revisiting the Quick-List
When I finally sit down to analyze companies from my Quick List, it’s usually been weeks or even months since I first added them. By that point, I often don’t remember exactly what caught my interest in the first place — which is actually a good thing.
It allows me to take a fresh and unbiased look. I usually start with a quick check on Tikr.com, just to see whether the company still fits my general investment criteria.
At this stage, I ask myself:
What does the company actually do?
Do I find the business fundamentally interesting?
Can I see this model growing over the next few years?
How is ownership structured?
Then I take a look at the financial history — revenue, profit, and margins. Are they stable or erratic? Has the company grown consistently? Is it profitable or still burning cash? What about debt levels?
Then I have a quick look at the valuation of the company. Are the multiples at least reasonable? Here, I only take a very rough look to see whether any anticipated growth has already been fully priced in, or whether the valuation appears excessive at first glance and is out of proportion to growth. A more detailed valuation will follow in a later step. Companies may appear reasonably inexpensive at first glance, but upon closer inspection, they may not be, and vice versa.
If analyst estimates exist, I’ll also check whether the market expects growth — but honestly, the most exciting micro caps are often the ones without any analyst coverage at all or where you can’t even find the financial numbers on stock screeners. That usually means more work later, but it also increases the odds of discovering a genuine hidden gem.
After this initial rough check, I can often cross the company off the list right away, because now that I’ve taken an objective look at it, not everything looks as great as it did right after I read a positive write-up about it, for example. But if the company still ticks all the boxes, I move on to the deeper analysis.
From Curiosity to Deep Dive
Once I have a rough sense that a company still meets my criteria, I move on to the company’s website. First, I take a closer look at what the company actually does. What products does it manufacture, what segments does it operate in, who are its customers, what is its business model, etc.? If I still find it interesting, I go to the company’s investor relations page.
I like to start with investor presentations, because they reveal how the company wants to be seen. These slides are designed to highlight the positives, but they’re still a great way to understand how management thinks about the business and its market.
I also enjoy comparing older presentations with newer ones. If certain KPIs disappear, narratives change, or strategic focus shifts, that can give you a good first impression of the management.
However, this is also the point where you need to stay cautious — presentations are marketing material, not objective analysis. At this point, you often already know all the positive aspects of the company and the investment thesis. Now you have to try to counter these positive aspects and find arguments why one should not invest.
That’s why I always follow up by reading the annual and quarterly reports, where you can find much more detailed information, paying close attention to:
Differences between what’s said in presentations and what’s written in the filings.
Footnotes and auditor comments — often where the most interesting details hide.
Risk sections (if they go beyond boilerplate disclaimers).
Insider compensation and related-party transactions.
If the company is relatively new to the market, I’ll also dig up the IPO prospectus. It’s usually the most comprehensive document available, full of long-term promises, which makes it fun to compare against current reality.
Then I always look at the latest press releases, because small or micro caps often only report once or twice a year, so the last report may have been several months ago and a lot can happen in that time. For example, the company may currently be valued so cheaply because negative news has already been priced into the share price, but this has not yet been reflected in the latest reported figures.
If available online, I also enjoy reading or listening to the company’s latest earnings calls or checking to see if there are any videos of IR events with the company. Other investors often ask interesting questions here, the answers to which cannot be found in the reports. Management can also speak a little more freely about their thoughts on the market, which sometimes allows you to read a little bit “between the lines”.
Secondary sources
Once I’ve worked through the company’s own materials, I move on to secondary sources to get a more independent perspective.
That often simply means googling the company and its products, checking the “News” tab for local coverage, or even searching for filetype: pdf/ppt to find niche documents like industry studies or technical reports.
I’ll also check YouTube for product demos or conference talks, which can sometimes explain the underlying technology better than any annual report.
AI tools can help as well — I occasionally use them to find competitors or gather background on the market structure. But beyond that, I still prefer to do most of the work manually. There’s something valuable about the process of searching, reading, and connecting the dots yourself. It is difficult to say in general terms what exactly one should look for here, as this varies from company to company.
Then, of course, there is often also secondary information regarding the investment thesis for the company. When available, I also read analyst reports or write-ups from the investment community (Substack, MicroCapClub, X, etc.). Older analyses and initiation notes are particularly useful for tracking how external expectations have evolved over time.
On Talking to Management
If I still have unanswered questions at this point, I will contact management or the IR team. Many investors love to talk directly with management. I don’t — at least not in person or over calls.
Instead, I prefer written communication, usually via email. There are a few reasons for that:
Written responses are more committal — there’s less room for “talking around” tough questions.
I want to avoid emotional bias. It’s easy to become sympathetic toward a management team you are talking to regularly and you like, which can cloud judgment when things start going wrong.
And finally, it’s simply more efficient. Coordinating calls with multiple companies is time-consuming. With emails, I can decide on my own when I have time to write down the questions or analyse the answers. And time is an important aspect when you are not a full-time investor.
So I gather my questions, write them down, and send them. If management is transparent and responsive in writing, that’s usually a good sign in itself.
If you like my investment style, you may also be interested in more detailed information about my current portfolio. Use this link to get 10% off the annual subscription for paywalled content.
Valuation
Throughout the analysis, I usually build a simple spreadsheet — nothing fancy, just a few quarterly figures like revenue, EBITDA, EBIT, and margins.
From there, I sketch out what I think the business could look like in three to five years.
I don’t build complex DCF models; instead, I do rough scenario analyses. I ask:
What might this company earn if things go reasonably well?
What multiple would be fair at that point?
Does the implied upside meet my hurdle rate?
At this point, I often realize that I still don’t have enough information to even make a proper guess regarding the future. Some of this information cannot be obtained immediately. Sometimes it takes several quarters to obtain this information or to get a better feel for the company and its management. If this is the case, the company usually ends up on my long-term watch list. At this point, I have already put several hours of work into the analysis, and it is important not to give in to the urge to “reward” yourself for this work by buying the stock.
But even if I believe that I have enough information to make a good guess about the future, it is immensely important that these assumptions are continuously reviewed. The longer you follow a company, the more accurate these rough judgments become — but especially in the micro-cap space, things can change fast, so flexibility is key.
The Art of Analysis
No two analyses are the same. Every company has its own dynamics, quirks, and critical variables. That’s why I don’t believe in rigid frameworks — particularly not in the small- and micro-cap world.
Investing, at least at this stage, is as much art as science.
Yes, information is more accessible than ever, and AI makes processing faster — but I still believe there’s an edge in doing the manual work yourself.
Taking the time to read, to think, and to piece together your own mosaic of information helps you develop conviction — and conviction is what allows you to hold (or sell) when it really matters.
Coming Next
In the next part, I’ll cover how I translate analysis into action — how I build positions, think about portfolio weighting, and monitor companies once I’ve invested.
I’m always curious how other investors approach their research. Feel free to share your own methods or thoughts in the comments — and if you’re new here, you can subscribe to get the next part straight to your inbox.