Leadership: The quality of a company’s management is crucial for microcap companies, as so much of the company’s future is riding on the leadership’s vision and ability to execute it. Look for “intelligent fanatics” with long-term vision, focus, energy, integrity, and superior intelligence.
Market Dominance in a Growing Market: Look for companies that can quickly establish or dominate a market, even if it’s a small, niche market. And a new market with growth potential is the ideal.
Define Customer Need and Demand Potential: Ask yourself what happens in the absence of whatever the company is bringing to market. If it’s a major pain point then that’s a good sign.
Undervalued Holdings: Check out the company’s balance sheets and all the financials. Some microcap companies have assets alone that are worth as much, if not more, as the company’s market cap.
Small, Under the Radar, and Limited Institutional Ownership: Institutional ownership of microcap stocks is often low due to perceived risk. This helps keep promising microcaps under the radar, which helps mute excessive stock price increases as the company executes its vision.