Speaker 1Welcome to the Planet Microcap Podcast, the number one destination for everything microcap investing. I'm your host, Robert Kraft, and each week I sit down with elite investors, CEOs, and market experts to uncover actionable insights and real-world lessons you can apply immediately. Are you a new or experienced microcap investor? Do you want to meet microcap management teams as well as other microcap investors from around the world? Planet Microcap hosts the highest quality in-person microcap events in North America. The mission is to bring the best microcap investors, companies, and allocators together to gather, connect, and grow. Visit planetmicrocap.com to learn more about our Las Vegas and Toronto events. Now, a quick disclaimer. This presentation is for informational purposes only and should not be construed as a recommendation to purchase or sell any security referenced herein. Planet Microcap Holdings LLC and Microcap Club LLC are not licensed brokers nor registered investment advisors. We, our partners, contractors, members, subscribers, guests, or affiliates may or may not hold positions in one or more of the securities mentioned in this presentation and may trade in such securities at any time. We may have received cash compensation from one or more participants at past, present, or future events. We recommend you consult a licensed investment advisor, broker, or legal counsel before purchasing or selling any securities referenced in this presentation. In this episode of the Planet Microcap podcast, I spoke with Tim Heitman, full-time private investor, Microcap Club member, and long-time Dallas Stars team photographer for a wide-ranging conversation that started at the World Cup and ended up deep in the weeds of Microcap due diligence. We break down how his time in the world has changed over the years, and how we break down how his time at Fidelity during the Lynch era, and later at David Tice's Behind the Numbers, shaped a simple but durable framework. Understand the business first, the numbers take care of themselves. We get into his approach to management interviews, including why he tells CEOs to treat him like a new board member, and how he uses Claude to grade his own interview performance, and why asking the jerk question is sometimes the most important thing you can do. We also cover why most common mistakes smart new investors make, and what sports photography taught him about controlling emotions under pressure. We mentioned several companies during this conversation, and I'm not a shareholder in any of them, and Tim is currently a shareholder in Mama's Creations, Noble Romans, and Innovative Food Holdings. And with that, please enjoy my conversation with Tim Heitman. Tim, thank you for joining me today. How are you doing?
Speaker 2I'm looking forward to this. So I'm doing great. Doing great. Even though it's 150 degrees here in Texas.
Speaker 1Yeah, right? Dude, we're in the dog days of summer right now, to say the least. You know, we're recording this August 12th, 2026. I'm actually about to go out to the desert to see my parents. It's just 115, 110. Dude, let's go. All right. Desert life.
Speaker 2Yeah, my parents used to live in Surprise, and so I know exactly what that's like. Just dry. Now they live in Florida where, you know, the humidity is so high. Yeah, the humidity is 100% instead of the temperature.
Speaker 1Right. 100%. Well, I mean, let's talk real quick. I mean, for those that don't know Tim, he also happens to moonlight as a world-class sports photographer. We'll get into the investing stuff. That's all, you know, that's fine. That's kind of interesting, you know, whatever. But he's also this world-class sports photographer. So Tim, you know, we were chatting in Vegas, and you were telling me about your summer plans, and they sounded way cooler than anybody else's. So how was the World Cup, man? Tell us about it.
Speaker 2The World Cup was actually much better than I expected. Maybe to give a little perspective, I've been the Dallas Stars team photographer since 1995. So I've been doing that a long, long time.
Speaker 1Wait, isn't that when they won the Cup? No.
Speaker 299.
Speaker 199. That's right. Okay. And so I got spoiled. Madonna, Mike Madonna, right? That was that time.
Speaker 2Oh, exactly. And I got so spoiled because within four years, they won the Cup, and then they won again the next year. And I was like, wow, this is going to be, you know, phenomenal because I really was, that was really kind of a hobby that became a second career. That was my night job. Investing was my day job. And, you know, that was my night job because teams played on the weekend and at night. And so I've gotten to do, you know, Super Bowls and World Series and all this stuff. But the World Cup, you know, is the World Cup. It's, and even from the outside, you're like, oh, wow, it seems great or anything. But when you actually are there in the building, and again, think about this, I'm there not as a fan. I'm there as a working member of the press. So I kind of have to put everything aside and just, capture whatever happens, you know, hopefully you get what happens in front of you. But to be in the building and to see how the fans there, you know, the cheering and the, you know, the Japanese fans clean up after the game and the Norwegians row and, you know, all these things. And it's so genuine relative to, you know, like they played where the Dallas Cowboys play. So, I mean, it's a totally different crowd, even though it's the same building or even a college football championship game. You know, it's just, the environment is incomparable to any other sporting event I've ever done. And I worked with a bunch of people. I got there last minute because someone canceled for various reasons and I had to fill in for him. So the team I worked with, one guy was from Germany. Another person was from England. Another one was from Norway. So, and they shoot soccer all the time. I shoot it like once a year. So it was great. I mean, these people shoot, Premier League all the time and UEFA championship. And so, so that element was, was cool relative to just, you know, showing up. And when you're part of a team, it's so much better because you control one, you're only worried about one quarter of the field because everybody's on the corner. So you don't even have to stress about, oh my goodness, Messi's scoring on the other end and I don't have any pictures. You don't have to because you've got a team. So it's whatever. And I think that whatever anybody paid to go to the game, whether it was $500 or $5,000, any fan came away saying, I got my money's worth or complaining about prices, everything. I don't think anybody walked out of that building going, wow, did I get ripped off? I mean, even, you know, like Messi, he didn't even play the first half of the game against Jordan and everybody, people like, wow, that's going to be terrible. He came in with, I don't know, 15, 20 minutes to go and he scores. I mean,
Speaker 1that's nuts. Yeah. Like that's why you're there and he delivers and he delivers. So, so that was great. Um, I was worried by the way, when, when, when it comes to, when it comes to, to sports photography, cause this isn't just specifically to the world cup. I mean, how do you decide on, or, or are able to kind of figure out like, all right, I'm anticipating maybe this happening, you know, let me get some, let me get a picture of this, you know, or let me at least be lined up because I think even if nothing happens, like I still think this could happen in this moment, you know, for any of these sports, but in hockey and soccer are kind of similar in that sense. Cause it can turn on a dime. I mean, the hockey probably a little faster than even than soccer, but I mean, How do you think about that when you're starting to frame a photo or getting that action shot?
Speaker 2That's actually a really good question because each sport's a little different. Like in soccer, you're assigned, despite the world cup, you were assigned a seat. So I was stuck in one place in one corner for all five or six games that I shot. So what's dictating me there is just paying attention to what's coming towards me. And you know, when do I decide the guy might kick towards the goal? So do I want to stay on the, the guy that's trying to score or the goal with this trying to defend, right? Um, in, in football, since you can move up and down the field, you're almost like an offensive coordinator or defensive coordinator. You're sitting there, you know, generally you want to be in front of the play, obviously, cause they're coming towards you, but you will actually look and say, okay, wow, they always seem to be running to the right or they run to the right, more to the left or wow. The tight end has six catches this game or whatever. So, so you're thinking, all right, where's the tight end? Oh, it's third down and seven, you know, where might they throw the ball? Are they in a zone? Are they in a man to man? So you actually are that engaged because you want, you're like, wow, Dallas Cowboys love to throw these fades into the left corner when they're 20 yards out. So you were kind of assuming that's going to happen first and then adjusting as it goes. Cause you want to be ready in the end zone instead of watching the play. I mean, you see the people in the end zone, the photographer, some of them have short lens cameras. Some guys are just watching. So, uh, that's the case. And then like basketball, everything goes to the basket, or they shoot us, you know, like there's only two or three places that our picture will be made. Um, so each sport is different, but you, and then even with basketball, you're like, oh, this could be the guy's thousandth goal, or this guy's shooting 60% from the field. Because when you're shooting for Reuters or imagine or Getty or whoever, you're trying to figure out what is the story that the guy is going to write. That's going to show up on esdbn.com. So you're trying to tell the story through your pictures. And sometimes that story changes in the second half, right? So in the second half, all those celebrations in the first half mean nothing. Um, and so you, you have to keep an open mind. You can't, you can't celebrate anything that's happening. Um, it's, it's actually the antithesis of your sports fan, right? Because you actually can't participate in the joy of why you were watching, you know, oh, my team scored or won the game or whatever. Um, I did have to, I, I did was lucky enough to photograph, um, um,
Speaker 1for soccer, the Mbappe, you sent me those photos. Oh yeah. Yeah. Those are sick.
Speaker 2So, you know, and, and again, when you see those guys live, it's much faster and more physical live than it looks like on TV. Right. Um, and, and that's something like I noticed, I probably got more good pictures of soccer guys battling and kicking in the first 10 minutes of a world cup game than I did in like a whole game worth of MLS. Right. And, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and.
Speaker 1I was going to say that makes sense. I'm a big, I'm a big LAFC fan out here. So some of those games do get when we play. la galaxy then it gets pretty physical for sure but you know you know how it is like during regular season you know you do there you kind of go through the motions a little bit you know you get whatever but you know when it's the world cup you're like all right this is gonna be i mean look at look at how physical some of the play was when uh you know when teams knew they were outmatched
Speaker 2right like those were just insane yep um and then you know like another example about the process i got to photograph uh aaron uh judge when he hit broke the records for most home runs right in the season and and again all this kind of blurs together you know he's my kid's favorite player
Speaker 1right now uh and and mine too sorry we're also yankee fans here so no that's awesome you're definitely if possible i'd love to see that photo oh i will definitely send that to you that is really cool and so the stress and i know we're getting off topic i know but it's fine listen this is cool stuff man and don't worry i will for sure tie it back to you
Speaker 2back to investing first principles well yeah and and honestly we will actually there is some things we could tie about you know being dispassionate and other things but um so he was he was in dallas uh he broke it at uh at uh ranger stadium and you know the lucky thing was was he broke it there he there was a double header and so the way the the stadium's configured i was on the outside third base outside of the dugout so there's four points and again you can kind of pick where you want to be during a baseball game so oh i want to take a picture of the pitcher or batter or shortstop right you can kind of influence that but obviously this is a big game everybody pretty much was told where to go well um i think he was actually lead off batter back then uh first or second he was he was he definitely bad maybe third but he was he definitely better than the first inning and the way the stadium's configured at the rangers if there's a runner on second base the third base coach you know how they always walk out of the box and they go way down and and frankly every photographer wishes we could put like a zapper on the third base coach so as soon as he leaves the box we can zap him and get him back in so the way that he was standing your angle you would he would have blocked judge at the plate if there was a runner on second because of he's so far down the line so obviously you're trying to get him hitting the ball to get a home run well you have no chance at that right it's the third base side so that's a little stressful but fortunately uh it was the first inning so the third base coach was where he was supposed to be and he hits the home run and and probably the best place to be is center field because it doesn't matter if he's the ball's coming in or coming out it looks like he's hitting it right i mean the angle of the ball um but i i knew that and the yankees were on my side so i i knew that he would run away right to first base and it wouldn't be till he rounds second base so he's coming towards me so the way i think of things is did i get the best picture of the day or did i get the best picture that i could have gotten where i was going to be in the first inning so i knew that he would run away i was right and the best picture i could have gotten where i was which i did was i knew that when he was hitting the home runs he was always turning towards their dugout and smiling or pointing or something and if it was a yankee stadium at the first base side you know he would be pointing that way so i knew when he came around second he would have to he would do something so even though the i have the hit and he's batting you know the picture that really told the story was him rounding the base smiling thank goodness i got it you know uh waving and it made a really good picture even though it wasn't the exact moment that he hit right um the other thing was great about that was it was his first it was the first inning his first at bat so they took him out of the game so you had nothing to worry about for the next you know three hours or four hours or whatever just enjoy the game you could just you know relax and enjoy the moment so um so that that is another point is it's it's more stressful than investing by far um because the moment only happens once right whatever it is like willie mays is catch you know basket catch from those are or um muhammad ali standing over you know those are iconic moments they only happen once when it happens investing you commit lots of mistakes and there's lots of things there's always another one coming along right so there's a there is a lot of pressure um when you're shooting important events not game 150 of you know the baseball season but um it's really much more stressful so that does kind of tie back to investing that you really do have to get control of your emotions at peak times of excitement or crisis or whatever um and and preparing for this i was thinking about it and they really do transfer over a lot you have to really be dispassionate even if you're not really passionate about it you have to really be dispassionate even when i'm shooting for the stars when they score a goal i'm not cheering i'm like you better turn my way so i can get you celebrating you know darn it so uh you know
Speaker 1stuff i feel like hockey is hockey and baseball i feel like are probably the two hardest it's like just just just throwing that out there i feel like they have to be the two hardest because with baseball you know you you're on every pitch right yeah you know that the pit it's going there but you know it's now it's going to be the two hardest because it's going to be the two hardest because it's also faster with the pitch clock right so now it's every 15 seconds like you got to be
Speaker 2on it and you know hockey is by far the hardest it's my favorite but it's also the hardest because the speed you pointed out yeah it is a lot like soccer but they can skate faster and people can run they can shoot faster than people can throw um when we started uh we were on lights so we had a picture we could take a picture once every three seconds which you know when they're around the net that's insane to try to get something good so and and there's lots of randomness there's tip bucks there's you know all kinds of things so so hockey is by hard by far the hardest baseball is hard because you have too many decisions to make for example um let's say it's the bottom of the ninth um and the team bat so the team batting is the bases are loaded and the team batting is down by three right okay if he if the batter hits the home run he's you know you want to be on him because he's going to swing and he's going to celebrate and all that stuff that's great well if you're on him he strikes out the picture was the pitcher celebrating right or he hits the ball and you never you never watch the play the crowd or the batter will tell you what's going on right so he hits the ball and you're on him waiting for him to celebrate because you saw the angle and you know what's going on and some guy jumps over the fence and catches the ball you know and robs him of the home run so there were three different things that all made a picture and you you can't you had to pick one and so okay i was on the batter and now he's on the batter and now he's sad great but the picture is the guy catching the ball right and and now you have to figure out what happened and where he is so you're right baseball's really hard football's easy because you know they're going to score or they're not and they're going to all be wherever it is and celebrate whether it's a touchdown or you know blocking a pass or whatever so so those yeah i think you're right baseball and hockey are the two hardest but for different reasons very cool
Speaker 1there's i man this could be we could do an hour just on your on this or more probably more because it's just it's so cool actually and also i mean once upon a time i and i think i told you this in vegas is one time or there was one point in my life where you know i'm a big surfer i had my fairly obvious and yeah and i remember um uh we i met i met this dude who is a surf photographer for rusty and he was like he was like yeah we're looking at doing you know some surf photography internships and I was like ticket boom like that sounds awesome like that you know my brain went to immediately like I'm gonna be a world tour like a surf photographer get to go to all the best locations in the world and you know they're gonna pay for me to just take photos and mind you I don't think I've ever held you know anything more than like an icon you know like a you know point and shoot right exactly like I had no idea what I was doing and nor do I think I have any kind of artistic ability whatsoever you know but I was like how hard could it be I
Speaker 3don't know these in the barrel like boom yeah I mean did you just point at it and it happens and
Speaker 2you know pictures yeah literally I think people think that all the time how hard can it be you just point your camera and you get 30 frames in a second how hard can that be right yeah it's very
Speaker 1hard it's really hard even when you know where you gotta be but uh but yeah no so I love it well let's let's take a step back you know let's let's let's take it all where it began you know because as you know yeah we're we're investing podcasts here um you've you've kind of told some of these stories you know on on other shows and everything so I want to kind of keep a fresh spin to it but I mean from my understanding you you actually got your start at Fidelity like towards the end I think
Speaker 2of the Lynchian run you know kind of in the middle um because I got there in 83 and and to be clear I was on the so I was one of the first I've lived in Dallas after I graduated college and Fidelity was hot because of Lynch and then he had George Noble who was running the uh overseas fund and you had the OTC and the low price guy you had uh Morris and Dan Off and all these guys so you know that was kind of go-go years of Fidelity so they wanted to put something in the central time zone so so that people could call in and you know the people in the west east coast didn't have to be up till midnight as people from California were able to call in and you know you called in to find the price or something so they moved to Dallas I was one of the first 100 people they hired there and I was I always wanted to be an analyst I love wanted to be an analyst at um so i thought my end would be getting on the phone as a retail you know they weren't stock brokers but you know you you'd help people with certain things um you know helping them decide their risk tolerance and all this kind of stuff right um and i got to be the liaison between dallas and boston where people would be like oh the market went up two percent and the magellan fund was flat what the hell happened you know that kind of stuff so i would was lucky enough that i would be the guy that would call boston and ask that question you know i was like what happened um and so i never really taught i never talked directly to peter but i got to talk to the analysts and then you know they would have quarterly calls with the people and talk about philosophy and everything like that so um so i got there in 83 and i think he started in the late 70s but um i learned right then and there i'd never wanted to be the guy that would call boston and ask that question you know i was like what happened to get a cfa i never wanted to get an mba because i just thought why do you want to learn what everybody else is learning you'll just think the way everybody is thinking right and so i was i really did get my education with lynch because what you saw whether he was on wall street week with lewis rukeyser or you know later on when he wrote his books um and did interviews you know he always had the gray hair which is amazing that he always looked like he did back then but he is what you saw in person was the way he was uh you know all the time and he was the guy one of the guys that came up with the you know you get three minutes as an analyst you can't tell me within three minutes what the story is you're not working hard enough you're not thinking about right or whatever so everything in all the books uh walk around the mall and see what's popular or what's your wife buying and he was doing that and what was crazy about him was he would generate these 20 minutes of time and he would be like oh my god i'm gonna be like oh my god i'm gonna be like oh 20 you know 20 returns annually he would own like every savings alone that was public you know he didn't run a concentrator portfolio of 50 socks he had like hundreds and still was doing 20 a year well i don't even know how you do we actually there was one time the fund got to a billion dollars when i was there a billion dollars and we were kind of telling people there's no way somebody can run a billion dollar fund you know back in 19 there's no way he can there's nothing he can buy with that money and he was like oh my god i'm gonna be like oh my god i'm gonna be like with that amount of money and he went on again for years and years and years and just crushed it so so that's kind of where i got started um and then i i went did some private things i was a trader all kinds of things like that but that was really kind of the the thing that started my thinking about you think of companies you know lynch was or uh you know buffett was popular michael price mario gabelli um i saw we saw the phil fisher back there he was actually in the 50s but they they all had the same theme understand the business first think like you know like that and again i lived that so it wasn't like we talked about this a little bit earlier when you when you see it happening in real time i think it it influences you more than 20 years later reading a book going oh that sounds like a good idea you know well because you've already seen it you've seen the success you know these people are writing books because it worked right if you're in the middle of it you're in the middle of it you're in the middle your perspective is is a little bit different um i mean i've probably i've done this 43 years um so you know i've probably done this longer than some people that watch this have been a lot um but but that really did send me down the path of understand the business first the numbers are the numbers things take care of themselves for sure for sure very cool so i mean
Speaker 1and then from there do you also um you did a stint at with david david tice right on the on the short selling desk at behind the numbers right
Speaker 2yeah that was that's probably the second most influential thing uh like i've like when i do management meetings i tell them i've done everything but but um being a stockbroker and compliance because compliance here's no upside right i mean everybody hates you in compliance um and behind the numbers with david tice was definitely the second most influential thing because it kind of solidified the business and it kind of solidified the business and it kind of solidified what i was thinking with with what i learned at fidelity what we were doing at tice so he had two businesses he had behind the numbers which he started first which was an institutional product where ironically fidelity would be a customer okay and so we weren't writing a newsletter like people do on substack now for example this this was we were competing against goldman sachs and merrill lynch and everybody you know like all those firms that had armies of analysts that are writing research reports they're still around but that was our competition and he also had the prudent bear fund which was a short-selling only mutual fund open-ended mutual fund which is insane to think about today that you could actually have a billion dollar fund that only shorted stocks um the mechanics are are insane but he used the research from behind the numbers um so fidelity would be a client tiro price federated and then the guys like george soros would be a client so what were they trying to do why why why was this such a good product back again this is late 90s early 2000s this is this is way before or about time shill it and all these people were doing things and this was the we were one of the first guys to do the earnings are are an opinion cash as a fact so what fidelity would want from us or or tiro price or even george soros is okay i know what wall street's telling me and i know what management is telling me you're my third party independent checker you guys understand how a business works you're my third party independent checker you guys understand how a this company is telling me that it's a 20 percent grower and i should pay 30 times earnings for this 20 percent grower right and our job was to understand the business and say you know they're doing things that are not sustainable long term to inflate margins or whatever you know now there's an app for all this stuff but back then it was pretty revolutionary and so we would be like you know this is really probably a 12 inherent grower for these reasons one two three four five so you would want to know that because they didn't want to pay 30 for a 10 grower and a short seller would want to know that because eventually if they if that was right then the margins would you know the the multiple would compress and all that kind of stuff but again we always started with the business first because if you can understand the why of the business it all then you can bring it back to the cash flow statement and the earnings and all of that and if you see enough companies over the years you're going to be able to do that and you're going to be able to do that and you're going to be able to do that and you're going to be able to do that and you're going to be able to do that it is pattern recognition and you know i've done a lot of leisure entertainment restaurants and things like that restaurant business models don't really they haven't changed you know 100 years and so when companies are doing things in the restaurant business and people like oh they're going to do this and do that you're like well i've never seen that happen you know outside of like chipotle i've never seen anybody have gross margins as high as they they have right so then well why is why is their gross margin so much higher right so you it gives you it gave us a where you could look at any company in an industry and have kind of a starting point as to what's going on and we would look at wall street reports all the time and you could understand you could look at a model and you say oh the story is gross profit margins are going to expand 500 basis points and they're going to put action and then so you would spend your whole time trying to figure out how they gain 500 basis points you know is it factory utilization is it pricing is it new products with higher margins and and back then no one was thinking about that and so if you put that together with buffett and you know winch and phil fisher with his scuttlebutt and all that it really did put those two things and that's kind of when the light bulb went off is like that's really let's let's forget the squiggles let's forget the daily price movements let's
Speaker 1let's really do focus on that very cool i mean so taking these two very influential experiences that you went through and that are you know with well-known folks well-known firms funds working with all the kind of the who's who on on in wall street how then did you start to formulate okay this is kind of the investing philosophy that works best for me and then how did you start implementing that strategy that's also a good question because i'm every once in a
Speaker 2while yeah you're really good at this you're you're you're at like um um uh you know you're you're at one of the higher level um interviewers that that i see i like when people do that not thanks man well yeah i'm i'm pretty so edit out everything i say that's stupid
Speaker 1that's why i'm no no we're keeping that in that's a solid compliment for me you think i'm gonna take
Speaker 2that out no you're the howard stern that's what i'm looking for you're the howard stern oh you
Speaker 1know that's funny that was funny someone someone called me that a few a few years ago well if it's
Speaker 2true yeah it's happened true so um all right now i've lost my thought so the what was the question
Speaker 1again so taking those two very influential experiences working with who's who whatnot like how did that how did that then formally shape the philosophy your investing philosophy
Speaker 2and then how did you implement it in practice um because i saw the success of it starting with fidelity and then saw how to actually implement it i didn't know how to implement it i didn't know I'll say this. you work on the short side now i was not i've never been a short seller and none of the reports that i wrote were ever pure short selling reports even though a lot of the stuff we did was shorts and and i have nothing against short selling it's it's just really very hard to do from a practical standpoint i mean it's so hard i could do another hour show just on the mechanics of how hard that is um but when you're on the short side you're always looking at what could go wrong right i mean now people say oh if you short stocks it can go to infinity and you could lose an infinite i've never first of all i've never seen a stock traded infinity so i don't think that's really a risk but you know as your problems as you're you know on the long side if you have a five percent position and you're 50 wrong it's two and a half so it gets less of a problem as it goes down right and maybe at some point there's a building or something that's got some value so your mistakes get less over time the more the worse they get if you're short and your stock you're it's a five percent position and you're 50 wrong it's now a seven and a half percent now now it's an even bigger problem than it was and that causes all kinds of problems with leverage and how do i get my cost basis up and everything else so when you're on the short side it really it really kind of alerts you to anchor in the business and to me valuation is an opinion right at any given time i've never seen anybody buy a stock because they did the discounted cash flow model and said okay the price of all these assumptions the stock should be worth 30 and it's 20 and it's going to go to 30 i've never seen anybody in 40 years buy a stock expressly that way right i don't know if you have either right so i was like well that's just ridiculous um but if you actually understand the business and kind of how it could grow and what can it can do you can take the mentality of the short sellers risk control uh what do i know what do i don't know what do i know that others don't know all of that and implement that right that's so so that's kind of how it transforms into a philosophy how it transformed from a philosophy into action is when i was at a small broker dealer in the 80s after fidelity uh i worked for or back then i traded with a guy named joe vidic who was actually in one of the market wizards books so there's another name drop i'm gonna do uh and he's at manalapan oracle and so he back in the 80s he would compete against made off another another name drop um back in the day you know for order flow like instead of trading it on the new york stock exchange you would call these guys up and trade the stocks off the market because you would save a couple of pennies you know from what the the exchanges would charge you so after i sold his business i did not want to go to pittsburgh no offense to pittsburgh but he sold the business to federated which was in pittsburgh um joe vidic out of the blue calls me up and says hey we've talked for 20 years and now you're free uh do you want to come work for me and at the time he had a long short long short hedge fund so when i went there that's where my philosophy of let's put this into action happened because i was the director of research so my job was to kind of do the research and then i'm a terrible portfolio manager i'm a great analyst but i'm a horrible portfolio manager so that's where i learned how to okay this is my idea how do we size it how do we trade it you know what's the long term on it so he kind of taught me how to take this i think this is a good business at a reasonable price and turn it into an actual alpha generating thing um so there's we're sitting here i'm not going to talk about it but i'm going to talk about it and i'm going to talk about it i'm like wow there's like these three magical steps um and then so after uh after i left manalapan i just kind of have been freewheeling it freelancing it from that because i just love looking at companies i just love looking at companies and i was like well i'll just take everything i've learned and just do it myself um and like i said if i if i would have been a better portfolio manager i'd probably be talking to you from you know a ranch in wyoming and still here in uh here in wyoming um and i'm like well i'll just take everything i've learned and just do it
Speaker 1here in texas but uh does that answer the question i guess yeah i mean if on on the strategy side i mean what ultimately then for you after all these experiences and you know everything that you're looking at career you know not doing a million one-on-ones at events and all that stuff you know i mean in microcaps what became then your ultimate checklist of all right these are the things that are really most important for me that i need to get to the bottom of before you know i mean i i'm sure you do like a small starter position for certain stuff but like before you make it a core
Speaker 2position let's say um you know this is this is debatable uh there are people that do do this and there are people that don't do this and both are valid and i've always told young people i don't care if you want to be a day trader or a value investor or a momentum guy or a garp guy you can be successful at any of those strategies option trade you just have to have your personality match whatever is required for that personality right i mean if you are a if you are an impatient person um you can never be a value investor right you will be a momentum investor or an option trader but because it just doesn't the internals of your psyche don't jive with what's required to be successful with that deal so having said that as a caveat um starters starters for me i'm just looking at annual report you know just doing the generic stuff annual reports transcripts um i love it i love pdfs when they do investor days and things like that i love that stuff we can talk about why why i love that stuff so those are kind of like oh now i have to start paying attention but i really my best my most successful ideas have always been through management interviews i mean i i got to say 90 of the biggest ones have been that and it's really really really important in micro cap because a lot of these companies let's face it they're one product companies they're two product companies right there there's key man risk there's all there this is not like idm or amazon or whatever right i mean it there there's way more risk embedded in the actual company if you're at the micro cap level than there is once you you know get up in the billion dollar range so if you really don't understand the why that management is doing what they're doing then if the stock goes down because a lot of these things are volatile all the time right and they go up and down for random reasons because there's just one seller that wants out and has nothing to do with the business if you if you don't really understand what's going on um you can't make any judgments as to how to react to things and it's not you're not trying to get more information than the next guy that's another thing i think people make a mistake on a lot of people are like oh if i just would have known that ahead of time or if i would have spent a lot of time on it i would have spent a lot of time on it i would have spent a lot of time on it i would have spent three more days looking for it or i was a little bit better i would have gotten that one nugget of information that would have saved me or helped me or generated alpha in my experience that's that that's never been the case if you can understand 60 to 70 percent of the story and you pay a reasonable price for that company you know if you're wrong on the you're trying to think about it you're trying to prevent this is where the short seller experience comes in you're trying to limit being wrong if i'm wrong and i lose some money great if i'm wrong if i'm wrong because i undervalued the the potential and it goes up a lot my biggest problem is a tax problem and i don't think anybody would be you know disappointed that oh my god i i thought it was a double i mean and now it's a quadruple right i mean so don't stress on the downside stuff and you have to kind of i for me i have to talk to management in order to kind of get to that comfort level that i understand enough of it that i i know what i don't you know it helps me figure out what do i not know about this company or what assumptions am i making from the outside that are wrong that's and it's every long um that i have high conviction on now the danger of that of course is you start falling in love with the management team fine line and i've certainly made that mistake let's go there let's go there i think
Speaker 1no that because especially on our pod like we we talk about this a lot and i think everybody has their own opinion about it and i think everybody has their own opinion about it and i think everybody has their own you know breaking points you know we talked with artem about you know friendly not friends right you know like yeah you know like that that seems to be more or less the going thing but you know i know quite a few investors that i'm very close with and friends with that you know they've gone to multiple you know friend dinners not just like all right investor dinner you know because like all right this person's awesome like i just want to hang out you know and and so i mean how do you manage that that bias so to speak inconsistently
Speaker 2i told you that i told you that i'll probably be more brutally honest than i need to be
Speaker 1um it's that's hard one of the hardest things to do right i'm friends with a lot of these ceos man like it's hard they're all everyone you know everyone's doing their best they're all nice
Speaker 2people you know like it's hard yeah i mean and they're all trying to do the right thing or most of them are trying to you know i'm trying to do the right thing i'm trying to do the right thing like like here's a great example like a great example and i am long the stock um mama creations right i mean everybody knows that home run dollar to 18 or whatever the hell it's at um and at the same time you have like the opposite of that which is innovative foods which is right in the sense that they both brought in an outside ceo and and we can talk about that too because like everybody loves catalyst like almost everybody that writes on on microcap club change in management has got is one of the top three reasons right uh and i'm sure sean with his project that he's doing on we're going to find out that change in management is one of the most common things and and rather so right if it's a microcap company it's done nothing for 20 years it's going to continue to do nothing for 20 years
Speaker 1unless something changes i mean mamas is probably like the most core like if you're a microcap core lord like you're like yep mamas that's yeah like and so there's a dilemma with adam right so when i i met adam one of the most charismatic dudes ever like oh and and one of the most um
Speaker 2self-effacing yeah you know anti i'm a team guy right and when i first met adam at a different conference um i had gone to i'd met carl wolf the previous ceo several times nice guy old guy you know great storyteller and the revenues tripled and the margins went down like 80 which is just inconceivable uh so adam came in and i met him and i asked him i'm like you know why the hell would you go from mandalese to to mama i guess it was mom man sees back then and so we had you know like a conversation and i followed up with one or two more and my pattern recognition i was like well this guy gets that he's not just i mean he's genuine and and not only does he say things that he's going to do he explains why he thinks that's what to do and then you can grade him on did he do what he said and and did it happen the way you know the things he can control did the things that he can control happen and those things actually help the business right that's kind of the standard well um i met i met adam at your conference i actually made a conversation with him twice and he's a great guy and we're friends and he actually returns my email but you know i still have to now put that aside and he's made me a lot of money like he's made a lot of people a lot of money but i i forced myself to to ask one jerk question that i'm serious about to keep that focused for example i asked him i said so um let's pretend that i am you're the younger better looking adam when you were at mondelez buying tate's bakery and doing your m&a take your current not so handsome adam who's been around longer and more stressful um how why have that adam sell the other adam your company at today's price which was like eighteen dollars you know he gave a he gave a decent answer but you know you have to keep if i didn't do there are several companies where if i didn't really kind of keep pressing what what could go wrong and just assume that those things are not going to go wrong um i've had that happen before where there was a ceo i loved what he did i understood everything and the company just literally blew up um not again not nefariously or whatever but he was just over if you like the guy too much you you start to diminish the risks that were always there that's right um oh we could lose this patent oh okay well you've done pretty good for two years well it's still in the risk section and it's still like you know it can happen so so i think that's the thing that i've learned by making a lot of mistakes is no matter how nice the person is and likable and smiley because look every ceo people said this on other podcasts that's how you get to be a ceo you're articulate and you've said this thing like 50 times right um uh i i kind of came up with this phrase quit trying when i do one-on-ones or it's like i don't want you to sell me i don't want you to sell me the stock i want you to explain to me your company right because that's what they're good at and and you have to keep your distance and it's very hard and and i haven't been able to do it every time and every time i have not i'm like i knew that could happen and just to minimize um i i was never long the stock but i um oh yeah oh scenario great story long time everybody loved the ceo you know i got this plan we're gonna do this and this and this and this and this and this and it just never happened the way everybody thought um but you know another guy that was well liked well respected had a decent plan um turns out that he never really executed it at the level that everybody hoped so but that's i think that's what you have to do you actually have to force yourself to be a jerk sometimes
Speaker 1that is a very original thing that has never been brought up on the pod that is that it will never return and also it's never yeah well i guess also it hasn't even been articulated that way because you know when you say friendly not friends you're like all right well what does that mean you know it's like is it more just holding them to the facts and then asking about the fact versus like you know what i've developed a relationship here you know we've talked multiple times i'm obviously an investor so they're returning my call like you know now have i gotten to the point where i can you know throw a you know not necessarily a jerky question because i know no but just a hard ball
Speaker 2a hard ball question that you know no one else has ever asked um or or they the other thing is then follow it up that's see that's the other thing that people miss a lot and this is where um back during covid remember the master classes yep you can get online i was still around i still get ads for that i i i took chris voss's master class oh okay cool chris voss is was a former fbi negotiator hostage negotiator negotiator and he wrote a book called um never split the difference and i've actually incorporated and basically the concept of the book is you know how do you ask how do you build a relationship with a hostage taker or something like that to elicit information through your questioning that can help you resolve the issue or or get to information that's that he's unwilling to give in just kind of a generic way and again we're not talking about insider information or anything like that and so he has several techniques um on how to do that and i've incorporated some of those because a lot of times when you're in a one-on-one or you're talking management they'll say you know we have i love that and one of the other thing i'll do is i'll take the i'll take a slide from their pdf and it may say we have the best sales force right our sales force is the best sales force that's why we're taking market share right i mean let's just take like that happens all the time right i'll take it i'll take that you know and we have proprietary i'm like these are words i didn't i understand what there are adjectives and what does this actually mean you know what does it mean you have the best sales force um and then one of voss's techniques would be what i'm hearing is you know they're the highest paid right you you kind of quantify or qualify what you think it means so they say no they're not necessarily the highest paid they'll do this right and then you can say okay well how does that translate into better sales if they're not the highest paid you know so if you asked a hard question and they give you an answer it now gives you the right to ask another similar question to get even deeper into whatever it is concerned you and you may end up getting three deep whereas if you were in an urn's call or they were doing the presentation or you were in a one-on-one where there's two people they would answer the question because they've answered that question 50 times we have the best sales and no one ever asks them qualify that or quantify that right um so that's
Speaker 1where that comes from and ai is super helpful with some of that now too right like you probably take their public presentation and just throw it into claude or something be like all right you know put your prompt and whatever i do that with
Speaker 2all the time i i take it um so if i'm preparing for a meeting i will load in the last eight conference calls and i will have it find every forward-looking statement and how this thing finds every forward-looking statement is beyond me um and then i say so find the forward-looking statement and then in subsequent quarters did that was that true or not right and so you can kind of so it kind of will help you grade their ability to it's not that they're lying or they're constantly having to revise guidance there's something about their business either they don't understand or they're not in control of that they think they are right so it tells you many many things um but but you can load that into claude and then it'll give you kind of a framework of okay these are the things that he's been accurate on and these are the things that are not press him on the not and then i actually record all my interviews with that plod we were talking about that it's p-l-a-u-d no e so i record every conversation and then i grade myself i have i have claude grade plod uh how good was the interview right because because i will have claude generate like three or four questions based on all of this and then uh using the vos technique and other techniques it'll say okay if his answer is this if his answer is this this would be a good follow-up question and you know 80 of the time they're just generic ridiculous questions every now and then you're like wow that's a good question and then after my one-on-one when i get to the end of the interview i'll say okay i'm going to go back i run that transcript through claude and say how did i perform relative to the expectations of my interview And it will point out all kinds of weaknesses. You didn't follow up on this question or whatever. And then you can take that and then you just send an email. I mean, everybody gives you their card. Then you just send a follow-up email. Here's six or seven things that we covered that, you know, I'd like some more detail on or can we have a follow-up call? And then you can go deeper that way. So, you know, and again, it's always going back to I just want – and it's, again, I don't need to know everything about the company. I just need to know what I don't know or what I – what are the risks that I need to get comfortable with before I can do this. And that – so, you know, we've kind of walked all the way from one all the way into the tangible stuff. But that's really how I do it. Again, it's not for everybody. You know, I think on interviews I've talked about my favorite spiel is pretend I'm a new board member. That is the greatest thing I've ever come up with, honestly.
Speaker 1Pretend it off. I love it. I love that, too. That's – one thing I've been thinking, too, as we're drilling down and, you know, you asked that question to Adam about, you know, your younger self. You know, I'm going to throw it to you. You know, if you're kind of talking to, you know, green behind the ears, you know, younger Tim Heitman, you know, getting his start at Magellan, not, you know, having no clue that he was going to become a little, you know, microcap maven, you know, doing all these deep dive interviews. You know, all the management teams at all these conferences, you know, all of that kind of stuff. I mean – Yeah, good question. How would you respond when you're a new younger self? Like, wow, how did we get here? Was there any inkling of a fascination with small microcap, you know, when you were first getting started? Or it was just a pure progression downward to our neck of the woods? Exactly.
Speaker 2It was actually a pure – I mean, because if you think about what information was available – To the general public in the 80s, 90s, 2000s, it wasn't – and it wasn't really until Reg D or Reg FD, right? Once Reg FD and the internet came about, that kind of information arbitrage that existed where every management would go to Fidelity, you know, there was a joke that literally, you know, in the 80s and 90s, if you were a public company and you were in Boston, you had to go to Fidelity and talk to them, right? Well, you and I couldn't. You couldn't learn anything about that, right? So until Reg FD and the internet, an individual investor trying to look at microcap stocks didn't really have anything to do, right? I mean, even writing the old-fashioned way where you wrote to a company and they would mail you, you know, an annual report and all that stuff, that really didn't exist for a regular, smart, intelligent person who wanted to be an investor. I'm not going to call them retail or amateur. You know, anybody that wanted to invest, it didn't even exist until then. But once all that started to come about, having spent 20 or 30 years in the institutional side, you understood that there is this informational arbitrage. And I know, you know, Maj has his info art that he does between conference calls. And it's funny. I wrote a substack one time. It goes, if you're a long-term investor, why are you listening to conference calls live? All right? Which is like the antithesis of what Maj is doing. But –
Speaker 1Well, Maj is – he's a pure breed, man. He's a pure breed.
Speaker 2And honestly, some of his – That is the best. I love Maj. It really works. Yeah. I mean, what – how he's using it does add value because there is – especially because of the kind of stocks he's doing. So let's go back to the younger me, you know, becoming the older me and getting the – what you learn, going back to Fidelity and everybody going through Fidelity, is information arbitrage. It exists at the microcap level without a doubt. Even with all the information and you can screen and – without a doubt. And, again, we're not talking about inside information. We're not talking about, wow, there's this – you know, I went and – I know some people do this. You know, I went and looked at the tax rolls and their factory tax basis is three times whatever it's on the books, right? I mean, you can do those kind of things. But you're not competing against the big money that's successful, right? Those people, if they're successful, they can't buy 50 million market cap companies or 100 million market cap. So over time, the competition – and I was one of those kids that when I went to Vegas in the 80s, I read Ed Thorpe's Beat the Dealer.
Speaker 3Come on, man. What else have we not named yet? Okay. Okay.
Speaker 2Do you have any of the horse racing books? No, no, no, no. Did you see that? There's that too. Sports betting books because I was one of those guys that I was like, let's find positive expectation bets, right? That's what Beat the Dealer is. That's what horse racing is in theory. That's what poker is in theory. So if you think about it in those terms, there are more positive expectation bets available in the microcap space than there is Amazon or whatever. So I think that if I started today – I think that if I started today as a 20-something or 30-something, I would be more successful than I am at my age relative to that than people would be starting today, especially if they listen to all the advice we're given because –
Speaker 1This is not investment advice. Please do your own deduction.
Speaker 2This is not investment advice. And people can and lose money and past performance is not future performance. But I do think that – I do think that if you are really serious about this and you're in your 20s, this is the greatest time ever in the history of this to have the tools available to you to do these things that have historically been successful. Let's put it that way.
Speaker 1Very cool. Actually, this tails into another question I have for you from my deep dive research on things, Tim Heitman. You know, correct me if I'm wrong. You trained junior analysts for years, right? All that. And now kind of informally through Investing 501. What would you say is the most common bad habit you have to break in someone who's smart but new to microcaps?
Speaker 2The obsession with thinking that if you build a model detailed enough, it will help you make better investment decisions. Why? Why?
Speaker 3Yeah, let's get it.
Speaker 2Okay. So when I make a model, and I've had this argument too, and I think I even wrote this on one of my sub-sacks, it's always a range. And sometimes the range is as wide as a truck, right? That this company could make – you know, companies always give guidance now, right? All the time. And, you know, let's say the guidance is $1 to $1.10. And everybody just says, okay, that's $1.05. Right? And we're going to put X multiple on it. Well, it's – I build a model so I can – if I understand the business, then I can tinker with the different parts. Sales, gross profit margin, gross margin. I can put my own thesis in on how the company works and tinker with it. So it will give me kind of a realistic range of earnings. And, again, to me, earnings are an opinion. Cash is a fact. And valuation is also an opinion. So I'm not building this to say I think the stock. Because if you're building a model and you spend all this time and you try to get all these numbers right, you end up doing what every analyst does, which is how do I – you know, half the call is how do I fill out my model to get closer to your guidance, right? And so you're all obsessed with short-term. That's the – you know, again, you're trying to think big-term, long-term. If you get it right, you're going to make a lot of money. So if you're an analyst and you're like, wow, if I can build this model and I know they're going to make $1.20 instead of $1.20. Instead of $1.10, ooh, this is awesome. No, it's not because that's just – it's short-term and it's random. If you say I want to build a model to understand what drives this business, is it gross profit dollars, which I'm a big fan of, versus gross margin. Like another thing I tell management is, one, we're not here to talk about the macro because if I don't like the macro, I shouldn't be invested in your industry anyway. And if I do like the macro or if I don't care about the macro. If I don't care about the macro, I'm paying you to deal with it. And if you deal with it better than your competitor, we're all in. Right? And so like a lot of people when they're building models, they're like, oh, well, you know, if the consumer is weak, then they're – you know. Models get you to focus too short-term on too many things where you miss the big picture and you're like, holy shit. I mean, think about the people that were modeling Amazon 15 years ago. The company doesn't look anything like that today. Right? And if you're doing it in every quarterly increments, you would have totally missed how they changed their business. But if you understood. That they're not selling books anymore or whatever, you probably would have picked up on that earlier. So absolutely by far stop obsessing over models and price targets without a doubt.
Speaker 1What's one investing concept, theme, strategy, philosophy, one thing that you for the most part thought was true throughout maybe either your entire career or maybe even for a short moment in your career that you then reflected on or you – Yeah. Quickly recognized and said, okay, wait, hold on. I need to rethink this analysis or rethink how I think about this. You know? What was that one thing you thought was true, but ultimately ended up being wrong or maybe misguided?
Speaker 2That's a great question. And this is especially true in microcaps. I always thought that board members and boards, independent or not, had their fiduciary responsibility to be shareholder first. I thought that that was true. And I'm finding more and more infrequent or more and more frequently that it is not true. That boards at the microcap level are not as diligent in protecting shareholders as I thought they would be.
Speaker 1Okay. Well, I thought I'd let you go with that, but now I got to follow up. I mean, I'm not going to ask you for a specific example. I know everybody's probably listening in. Noble Romans. Noble Romans. You said it. But yeah, I mean, like, all right, you said it. So use that as an example, I guess. I mean, I'm sure there's countless examples, right? You know, I mean, we've talked about it many times on here before about, you know, independent boards and the importance of having an independent board. And, you know, but then sometimes we see ideas where they have technically an independent board, but it's just not the right independent board ultimately. So, I mean, I'd love to dive deeper. Let's hear more.
Speaker 2Okay. Usually that manifests itself. Like, when I do management interviews, I always ask the question of, give me an example or two of where management added or where the board member added value. You know, like introduced you to somebody or got you or helped you get a contract or something like that. Because boards can actually be very positive at the microcap level. They can be the catalyst of themselves. But you encounter lots of times where it usually centers on two things. And this is I'm talking about. The independent board members. They allow management to be compensated more richly is going to be an inflammatory word, but they're overcompensated for their performance. And they're not held accountable for their mistakes. And that doesn't mean you have to fire them. You know, it doesn't mean you have to fire the CEO or whatever. But those boards that I'm dissatisfied with let the board. Current management team. They give them a much longer rope than I think shareholders deserve. Do you think that'd be a fair statement?
Speaker 1Yeah, I'd say so. You know, this also harkens back to, and you know what I, I said, I'm, I, I was, you, you said it and I wanted to follow up. I didn't want to, cause I knew this would end up turning into maybe probably another 30 minutes, but I don't care. I'm not asking anyway. Now, you know, you, you know, you, you mentioned. You mentioned earlier how as part of your management meetings, you tell management teams straight up, like, treat me like I'm a potential new board member. How do you marry those two concepts of thinking, you know, from the investor side of like talking to management teams as, you know, a, you know, just to be, help them get into that mindset of the type of one-on-one that they're also having with the thought of, all right, now analyzing this board as well and seeing, you know, if they are real, you know, protectors of shareholder value. Or their, their incentives are aligned.
Speaker 2Okay. Um, I think approaching it. And again, that's like the first question I come with. I'm, I, I'll sit down and I'll say, we're going to do this totally different. We're not going to talk about margins and macro. We're not going to pretend that I'm a new board member and you're onboarding. Well, what, what does that even mean? Right. What, what, what are we trying to do? So what we're trying to do is one, we're getting them out of pitch mode and we're getting them out of the 24 other meetings that they're going to have that day where they're going to say the exact same thing. Because when you're on a board. What do you do? What does management, how does management interact with the board? It's about strategy. It's about long-term strategy. They always give a big presentation in private. You know, this is our goals, all this stuff. And we're not trying to get that information. Clearly, you know, it's proprietary and that's not the point. But one, it shifts the conversation from I'm an outsider that you're talking to as an investor to now I'm a half insider where we're talking about strategy. So first of all, it shifts the focus of their thinking and their mindset. And I've even had guys, management teams even say, well, Mr. Board member here, we just had a board meeting and, you know, let's talk about some of the things that, you know, they could talk about. So it shifts their focus to bigger picture, longer term. It allows me to use the word we. I can be more confrontational. By doing we, why do we think that this is the, you know, because again, we talked earlier that it's all the catalyst is almost always a new management team, right? I mean, like I said, that's always the case. So why do we think this is better than what the last management team did that we had to get rid of, right? So that's a really good thing you want to know. But if you were an investor and you're like, well, why do you think you're doing that, right? Then they may be like, well, none of your business or, you know, who are you? So it helps you, it kind of elevates your status mentally in their mind and allows you to get to those tough questions that we talked about earlier, the jerk question or whatever, right? And then third. And third, you can close it with the classic pre-mortem question. We used to do that at Tice all the time. What would kill this company or, you know, not the what's, some people call it the what keeps you up at night and all that. But so here's how you can shift that too. You can say, okay, so now we're sitting here, now we're sitting here three years from now, having the same conversation, three years into the future. And we haven't achieved all the goals that we talked about here today. What happened? And we can't use macro because we won't hold you accountable. But as a board member now, I have to hold you accountable to the shareholders that we didn't achieve our sales growth or we didn't achieve the margin expansion. What was it that we didn't, what was it that we missed? Not what was it that you missed? Okay. You don't want to be, you're asking a tough question, but you're not asking it in an accusatory way. So I have found when you shift it to a board member, it kind of diffuses some of the tension that would exist. You know, like if you were a 10% shareholder and you were asking these questions, they'd be like, oh no, there's, he's an activist waiting to happen. Right. But you can actually ask kind of activist questions. Um, but it's a more friendly way. So it's a more inclusive way. I love using we, I never say you, it's always we, but then you can finish it off with, and then depending on how it goes. I mean, I've told guys, so why wouldn't I, should I fire you then? And, you know, sometimes I gotta say, yeah, I would fire me too. You know what I mean? So again, that gives you kind of a sense. So the board put me on the board opens up lots of, uh, areas of questions and things that, uh, I don't think if you're sitting there thinking like an investor and asking, cause again, if you're on the board, you're more curious, you know? Um, cause what, two of the things that I've found, one new management comes in the biggest risk. One of the biggest risks is culture changing culture. I mean, my goodness, you just fired a bunch of people that have been here forever. And this isn't a company of 10. Thousand people. It's a company of 50 people or 200. If those 200 people aren't on board with your, your new great ideas because they love the old guy. So you can, I even asked that question. So how do you deal with the change in culture? This is a very small company with few employees. What have you done again? Ask these open-ended questions and they might say, wow, we had a, you know, I did a one-on-one with the top 50 people in the company. Wow. That's kind of interesting. I would think that'd be a positive. So it gets you to ask. It's questions that aren't about margins and numbers, but helps you understand what the heck's going on. Another question I love is, okay, you have an inside Salesforce and you've decided that you need an outside Salesforce to sell whatever the hell it is you're selling or whatever. And I'm like, well, those are two totally different skill sets. So are you using the same people and they're going outside? Well, yeah. Well, why do you think that? Why do we think that's a good idea instead of hiring new people? Is the same sales manager running both teams? No. See, that just takes you down a whole different track. Maybe that's not what you were looking for. No, no.
Speaker 1I mean, I'd say because I really want, let's say, newer small micro cap investors to be able to, you know, take from what you do and feel the confidence to also say that they can do this as well. I wonder if sometimes, like, you know, the management team sees Tim come out and they're like, all right, this guy. Clearly, you know, he knows what's up. Like, he's been around the business for a while. Like, I'll play his game, you know? Yeah. Like, I wonder how receptive some management teams would be to, or in your opinion, I don't know if you've seen it, but like, would be open to, you know, maybe some of the young, you know, there's a lot of younger guys listening in, you know, that want to take heed and really, you know, do the Tim style of maybe being able to extract more insight or differential insights from these management teams. How best do you think maybe somebody? Who's a little bit younger, Tim, who doesn't have this worldly experience now would, what would you tell him to, and how to, you know, enact some of these, you know, games, so to speak?
Speaker 2I would, I would take the company presentation that they're using at the, at the conference or an investor day or something like that. Something that, you know, has all these pitch slides about how great we are and who our competitors are and all this stuff. And I would go through that slide deck. I would pick three or four of the slides that are interesting to you or makes you curious and bring those to the one-on-one because, you know, a lot of times they have the slide deck there, right? And they start going through it. And you could say, well, I would just, I'm really curious. I think you have a great slide deck, but I really am interested in how these four slides or these two slides or this one slide, you know, I want to expand on that. That can kind of get you the same way again, because you're trying to be inclusive and a, Hey, I'm curious. I did my work. I did my work. That's the other thing. Come prepared. You don't have to know everything, but I, one reason why I read conference calls is I don't want to ask the same six questions that just got asked on the last conference call. Now, maybe there's a good one. And to our point earlier, maybe there wasn't a follow-up and the follow-up would be a better, you know, on the call, you said this, you can use that in this as this technique. So you have the slide deck and then read the transcripts and you might find something where they said, we want to, we're going to grow our revenue by $200 million. And it was left at that. And maybe there's a slide deck that's up there and just go in and say, uh, I'm curious that extra $200 million, is that coming from new units or price increases or a new, you know, if you kind of ask these questions where you clearly have done your work, but are asking it in a curious mode, they're more than happy to talk to you about. Actually, they'd probably love to talk to you about that. So Tim, we're going to
Speaker 1bring it home. All right. Follow me on how we're going to bring it home here. All right. So we started off the first quarter of this interview talking about, you know, your obsession with, uh, sports photography and, you know, how you've been getting after it, you know, for geez, like 30 years now, you know, we've clearly dove into now your obvious obsession with microcap investing and looking at management teams. You know, I think people can probably pull from both aspects of the interview thus far of how they can relate, but truly, you know, from the horse's mouth, in your opinion, what would you say are the two things or sorry, the things from both of these, um, I don't want to say hobbies, but just, you know, your interests, your core, core interests to who you are, how would you say they most interrelate that help you be better at each? These are going to sound simplistic and other
Speaker 2people have said them, but they say them because they're true. But in both cases, as we talked about this with the photography, in both cases, you, you absolutely have to control your emotions. You, I would give another advice I would give the youngins is take basic accounting. So you learn how to read an income statement and read all the Thaler and Danny Kahneman and every behavioral finance book ever written that has destroyed more value. Yeah. I'm zooming in here. I'm just going to name every book on your shelf. That, that has destroyed performance as much as anything else. Right. Um, I mean, like Peter Lynch has famously said, more money has been lost. Uh, anticipating recessions than inter-recession as far as investors. Um, so both of those things require control of emotions and they actually both, you have to have a plan, right? I was telling you about it and you have to understand the game you're playing. Like we were talking about, it's different for football than it is for soccer than it is from baseball in terms of how you're trying to get the picture, right? You have to understand football is not basketball and basketball is not hockey. So if you don't understand, the business and have a plan on how to, what, what your process is to understand the business. So that's what it is. Emotion and process. Those are the two. I never thought about it that way, but those are, that's what it is. Control your emotions, be consistent in your process.
Speaker 1I mean, geez, this is a, that's a perfect, perfect place to end. I want to keep going, but you're going to be back on at some point. We're going to do a whole new jam session on, on all sorts of stuff. But Tim, you know, with, with that, where can our audience go and, uh, get in touch with you or follow your sub stack, you know, just hear more things, Tim Heitman.
Speaker 2Okay. Um, one, yeah, I am a, I think you gave my micro cap club, uh, deal. People can message me. Um, I don't post a lot on there, but you know, I am exist. I've returned in any email or everything. Um, my sub stack is investing five Oh one. And in the future we can talk about how that random title showed up. Um, I haven't published in a year, but I've told my wife that I'm going to publish at least once a month now. And, um, so they can comment through there. Um, those are probably the two I'm also on Twitter as investing five Oh one. So they can DM me on there. I definitely post more on there. And like when I'm writing stuff, I'm not, I do what we call one hour analysis takes me probably a month to do, but a month to do analysis isn't as cool as one hour analysis. And the goal there is to try to teach. Um, so that's the two places are the three places to find me.
Speaker 1Absolutely. And it's going to be a T Heitman, the it man, seven, one, four on a micro cap club. Tim, this was an absolute pleasure, man. It was so fun. Finally getting to hang with you in Vegas. And you know, you spent it, you spent it. Spending some time here with me today. That was really cool. And I look forward to the next one, man.
Speaker 2Yeah. Like I said, I, I'm glad that I got interviewed by the Robert Stern or the, uh,
Speaker 1the Robert Stern, Robert Stern. That's what he has. You're the Robert Stern,
Speaker 2the Howard craft or the, the, the, the, the, this was, I, I honestly, I really did enjoy this. This was fun. This was laughing and, you know, getting to talk about cool things and hopefully people that watch it will take away at least. You know, one little tidbit.
Speaker 1Oh, for sure. I did, man. I loved it. Anyways. Well, Tim, thanks again, dude. And, uh, I'll see you soon.
Speaker 2All right. Thanks again. Thank you.
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