About ten years ago, I was re-reading the classic investment book Common Stocks and Uncommon Profits written by the legendary investor Philip Fisher. In Chapter 10, Fisher wrote that during his investment career, he had always assumed that most of his profitable growth stock ideas came from getting out and talking to industry insiders, business executives, university researchers – people in the trenches of the industries he was interested in investing. When he performed a study of where all his best growth stock ideas actually came from, he was surprised to learn that four out of five came from a small network of like-minded investment professionals. I was already investing mostly in microcaps at this time, but it was after reading that insight from Fisher that really kickstarted my desire to start to build my network of like-minded microcap investors.
In this article, I would like to share what I have learned in building and maintaining my own network, as well as observing other successful investors develop their abundant investment networks.
If you are anything like me, your initial impressions of the concept of networking was negative. I used to have this image that networking involved going to conferences and speaking to as many people as possible, and talking to them just long enough to get a business card into their hand. However, over the years, my impression of networking has changed. Whether you know it or not, you are probably already involved in networking with other investors to some extent. My experience is that it is absolutely necessary to connect with other investors if you want to improve your chances of success as an investor.
In my experience, and from observing other investors with strong networks, the key to building a strong network is being generous with your time and talent to help make other investors more successful. If you do this, without focusing on what’s in it for you, it will come back to you over time, as many of your best investment ideas will come from your network, and you will be able to draw on your network for knowledge and expertise when you need it.
The internet and social media has made it much easier to connect with other investors. Here are ten ways that you can use your time and resources to help build your microcap investment network:
- Become a regular contributor on microcap investment forums. There are many microcap focused forums on investment sites like Stockhouse, InvestorsHub, Silicon Investor, and Investor Village. If you become a regular contributor, and provide good quality content, whether it is with stock write-ups, or links to other relevant content, or just feedback on other’s ideas, you will build strong relationships that will extend off-forum. Even better yet, start a microcap focused investment forum yourself, invite your current network to participate and moderate the forum. If you build it and provide quality content, good microcap investors will find it. The only downside here is that the forum activity tends to ebb and flow based on the moderator’s activity until it reaches scale.
- Twitter. I have seen a number of microcap investors build a very large network in a short amount of time by regularly sharing relevant information on Twitter. If you tweet and retweet quality content, other investors will find you.
- Start a blog. Besides the benefit of having a permanent record of the evolution of your investment process, a microcap-focused investment blog is an excellent way to develop an investor network. In order for it to be a success, I think you probably have to post new content at least twice a month. If you provide good content, people will find you. Blogging is a great way to build a network of like-minded investors.
- Write a blog article as a guest. Blogging is a time intensive activity. If you don’t have the time to manage a blog, write and submit blog articles as a guest author. Many bloggers in the microcap world would welcome a guest blog post if you provide good quality content on a relevant topic or a good stock writeup.
- Attend microcap focused conferences. There are a number of microcap focused investment conferences that happen throughout the year. They are great places to meet microcap investors. Don’t make the mistake I did and wait until you are a seasoned investor to start attending these. Keith Ferrazzi, author of Never Eat Alone suggests that if you want to be a conference commando, organize a conference within a conference. For example, you could rent a room at the conference hotel and arrange a mixer at the end of one of the conference days, and invite a number of investors that you would like to reconnect with. Or, if there is no formal conference banquet, you could arrange a dinner gathering at a restaurant for a small group of investors. When you meet a new acquaintance at a conference, send them an email within a day or two of arriving home, saying that you enjoyed meeting them (be sincere) with a brief note about what you discussed to jog their memory, as they probably met a lot of other investors.
- If you are really ambitious, organize a small conference in your area and invite local microcap companies to attend. Microcap investors will find the conference if it has good companies presenting. There is no better way to meet every single attendee at a conference than as the event organizer.
- Attend microcap company annual general meetings. Not only will you get a chance to speak one on one with management, by attending AGMs you will often meet other passionate investors who probably travel in the same circles, investing in similar microcap companies as you do.
- Organize or attend an informal meetup in your area. Invite other microcap investors in your local area to attend. If you don’t know any microcap investors in your area, post a note on a few microcap focused investment forums to spread the word. Some investors do a meetup monthly at the same local restaurant, whereas others do it informally and change geographic locations.
- Build a brand and broadcast it. Create a brand around your name in the microcap space. If you post on public discussion sites, post under your first and last name. Same thing with Twitter. People will associate quality content with your name, and will want to be a part of your network.
- Join a microcap-focused private forum like MicroCapClub. If you are an experienced microcap investor, there is no better way to potentially connect and collaborate with 170 experienced microcap investors. With MicroCapClub, Ian Cassel has created a first class forum for connecting a phenomenal group of people together who happen to share a passion for microcap investing. If you are serious about investing in microcaps, and you are not yet a member of Microcapclub, you should make it a priority in 2015 to apply.
Obviously there are only so many hours in a day, (and so many dollars in a travel budget), so you probably can’t focus on building all of these networking activities. But if you dedicate time to becoming active in a few of these activities, your network will grow rapidly.
Once you’ve started to build your network, in order to maintain your network, you need to keep in regular contact with the investors in your network. Keith Ferrazzi, author of Never Eat Alone, calls this pinging. Some people who you have a stronger relationship with, you may ping once a week or monthly. Others may be once every two or three months. This may involve sending a private message, a quick email or making a short phone call about a specific stock or investment idea. It may just be posting content regularly on your blog or forums you frequent, or tweeting content out to your followers. Because good relationships progress with time, regular contact and follow-ups are important. Over time, every interaction you have with your network adds to a deeper relationship.
If you want to continue to grow your network, and take it beyond this level, you need to look for ways to nurture and strengthen the connections in your network, by adding more value to your network than you get back. The business world is not zero sum, so you need to do this without worrying about whether you are getting your fair share back. You need to look for ways to make those in your network become more successful without keeping score. According to Adam Grant, author of Give and Take, an easy way to do this is to make time to provide five minute favors. In his book, Grant tells the story about the most successful networker in Silicon Valley named Adam Rifkin. Rifkin is a self-described introvert, and doesn’t fit the mold of what you would think of as a master networker. However he attributes much of his success as a successful connector to his mastery of the five minute favor, where the help he gives benefits the person on the receiving end much more than the cost (in time) to him. Here are a few examples of five minute favors:
- Introduce two people in your network that would mutually benefit from knowing each other. Rifkin strives to provide 3 introductions within his network every day. For the rest of us mere mortals who have smaller networks, it may only be once or twice a month that you do this. Maybe it’s as simple as connecting two people in your network who have a common interest in the same stock, so they can compare notes. If you are active on Twitter, send out a tweet to your followers recommending they follow someone within your network that you think they could benefit from following. Weak networks tend to operate like a hub and spoke model, whereas strong networks operate more like an interconnected community. The more links between the investors within your network, the stronger your network will be.
- Knowledge sharing. If you come across an analyst report or write-up on a stock that someone in your network owns or follows, pass it along to that person. Maybe it is an investment book that you just read that you think they might enjoy. Send them a copy. Maybe you just spoke to management of a company you own, and you learned some key insights about the business. Send a brief synopsis along to those who might have an interest. Or maybe it is just an article on an industry they follow, or an interview with an investment manager they respect. Pass it along with a brief note saying something like “I thought you might find this interesting”.
- Mentoring investors with less experience than you. No matter what investment skill level you are at, there is always someone you could share your expertise with to help them learn the ropes of investing. Take the time to do this. It may be something as simple as suggesting a book for an area someone within your network would like to develop their knowledge in. Maybe it is answering a question on an investment forum from a young investor. Maybe you’ve answered the question 20 times previously. Take the five minutes to craft a response or provide a link to a previous response where you answered the question in the past. The small amount of cost to you is far outweighed by the benefit that you have provided. The other area you may find opportunities for informal mentorship, are helping experienced investors expand their area of expertise into an area where you have some expertise. For example, over many years, I have developed a pretty good knowledge of the non-resource Canadian microcap area. There are a number of U.S. based investors over the years that have reached out to me requesting information about the Canadian markets. Maybe they are just looking for occasional guidance like where to find Canadian insider filings or regulatory filings. It is an occasional five minutes of my time, but it benefits the person on the receiving end immensely. I have found mentoring other investors is an area that builds strong relationships and connections.
- Offer to provide advice or feedback on an idea. Maybe it is just writing a short note to recognize or recommend someone on LinkedIn. Play devil’s advocate or provide constructive feedback on a stock idea that you have looked at. Taking a few minutes to provide feedback can sometimes save the other person hours of research.
There are lots of ways to help others at little cost to you, yet benefit those in your network in ways you don’t expect. If you can add a few more five minute favors to each week, it’s a great way to contribute more value to other investors within your network without making a large personal sacrifice, and a great way to strengthen and nurture your network. Again, you should do this without expecting anything in return. If you insist on the other side reciprocating every time you help someone, you will have a much narrower network. The investors that I have observed who have the strongest networks think about how they can make others successful through their generosity. The key to building and nurturing your network is to add more value to your network than you get back.
If you are an microcap investor just starting out, I hope this article provided you with a few ideas for building relationships and connecting with other investors. If you are a more experienced investor, and have a large network of like-minded microcap investors, I hope this gave you a few ideas on how to strengthen the connections within your network. If you work at consistently building and nurturing your network, I guarantee you will reap the benefits over time as your network will help you become a more successful investor.
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