It’s hard to remember now, but 20 years ago Amazon (AMZN) started out as a tiny entity. Today, the company has more than $200 billion in revenue.
Berkshire Hathaway (BRK/A) co-founder Warren Buffett began his company with $100 of his own money (plus $100,000 of his investors). Today, the company is worth more than a $500 billion.
There are thousands of stories of small companies becoming larger companies over time and benefiting their investors. For investors, smaller companies may offer more potential upside.
Let’s say that you’re interested in an emerging industry like marijuana.
There are probably 100 pot companies or more that you could invest in right now, and in my view many have performed well for investors.
Whether the businesses are sustainable and will survive requires research and analysis.
Capital is scarce and precious. I think it’s important to find areas that investors are personally interested in. In my opinion, the same holds true for effective managers.
Yes, you want highly qualified people, but I think most management teams have all kinds of impressive academic credentials.
I look for executives who do what they say they’re going to do. It may not be successful, but by executing their plans it increases confidence and establishes credibility for investors.
If their plans are fundamentally sound and smart, in time, there is a good chance the business will head in the right direction management says it will.
Smaller entities take lots of patience. I think you have to think five years or more.
In some cases, you will be wrong, and you can use the loss for tax purposes.