💼 THP 07/24: The Rise of the Microcap
Microcaps, Coursera, Argentina, and Japan
My dear fellow Hermits 👋
Welcome back to 🧙♂️ The Hermit 🧙♂️
ICYMI:
📈 Investment Thesis: Corticeira
🧗 Our Investing Journey: Project Finance 101
💼 The Hermit Portfolio: June (previous) Update
If you haven’t yet, subscribe to get access to this post, and every new post
With 💡 Hermit Premium, you can effectively hire a full-time analyst for $25 per month or $200 per year (on any price increases, you are locked in at your original rate in perpetuity).
💡 Hermit Premium members get access to
📈 Exclusive Investment Thesis, and
📝 In-depth Commentary on Company Updates
🎙️ C-suite Interview Insights w/ notes and transcripts
💡 Hermit Premium members also receive a dedicated post at the beginning of every month outlining changes in The Hermit’s microcap portfolio, including:
💼 transparent access to a seven-figure portfolio
💬 detailed commentary on the thought process behind portfolio allocation
💲 company valuations and insights, and
📊 quarterly performance reviews
Introduction
This second post in the series will focus on strategy and edge. We will dive into the core strategic decisions, highlighting business fundamentals and bottom-up research principles used to assemble The Hermit Portfolio. This portfolio is a proxy that replicates the exact data from the author's seven-figure portfolio.
This publication is confidential and is intended solely for the use of the person or entity to whom it is given or sent and may not be reproduced, distributed, or transmitted without the prior written consent of the author. By accepting to receive the full post as a Hermit Premium member, the recipient agrees to be bound by the foregoing limitations.
None of the following should be construed as investment advice. Please consult a financial advisor before making any investment decision. You will find a full disclaimer at the end of this post.
Strategy Overview
The core strategy of The Hermit Portfolio is simple and effective:
💼 Ensemble of exceptional MICROCAPS
🚀 Antifragile companies
🌎 Worldwide company selection
👑 Ownership of 5 to 15 positions
⌛ Holding period of 7+ years
🔄 Minimal portfolio turnover
🕓 No market timing
📈 Uncapped upside
ℹ️ Asymmetric information
What I’m looking for in a company:
Misunderstood or temporarily depressed fundamentals
Fanatic managers w/ skin in the game
Huge Total Addressable Markets (TAMs)
Expanding competitive advantage
High revenue growth potential
High profitability potential w/ abnormally depressed earnings (currently)
Obvious and simple reinvestment opportunities
Priced at a steep discount to the long-term FCF generation potential
NEW: Thesis Explained
In the previous note, I did not include my cash position and a unique position I tried to keep under the radar.
This position was one I started researching in July/August 2023, anticipating Javier Milei's victory in the preliminary election. As we now know, he not only won the preliminary round but also the first round in October and the runoff in November.
During that time, I built a position in these six companies as a singular bet on Argentina's progress in the coming decade.
