I met Andrew Pogue at the Planet Microcap Conference in Toronto last year and knew I wanted to have him on as a Skull Session guest.
Andrew is the author of Underlying Value Substack (@underlyingvalue on X).
The focus of our conversation last week was on deep value investing with a catalyst: hunting globally for small-cap mis-pricings (South Africa), realizing that a good business might still be “messy,” and capital allocation discipline.
We also dug into how to use and not use AI in stock research, and managing portfolios as conviction builds.
Skull Sessions is a collaboration with Geoinvesting.com, a full-stack microcap research platform and MS Microcaps LLC , home of the Microcap Quality Index (MSMqi).
The idea of “deep value with a catalyst” sounds simple, but it’s actually demanding. It forces you to think about timing, incentives, capital allocation, and whether you truly have an edge, not just a spreadsheet that looks attractive.
Microcap investing is a corner of the market where if something looks obvious, it might not actually be priced into the stock. With that being said, Andrew does not confine himself to microcaps, and one of the reasons I found this conversation beneficial.
Here are the key themes from our discussion, in Andrew’s words:
1. Can you tell us more about your background and career?
“My first job, (graduated 2009) was at Brown & Brown, which is this insurance brokerage based out of Daytona Beach, that would just buy brokerages, and they’d be paying two to three times, and they’d be recognized for it at 15 times earnings. So that’s kind of like right out of the gate… was my first exposure. Then I worked for Accenture in their business strategy practice for six and a half years. That was really mega fortune, 50 companies stepping in with more of a specific focus on executing different business divisions,. Microsoft, Cisco or Sprint are some of the examples of companies I worked at. After that and doing some m&a work, I went and jumped into Platinum Equity as an ops professional, where you’re really dealing with creating and executing a playbook, post acquisition of various companies, and you’re working with senior management to execute it. And then for the last five years, bought and operated a business, did a “bots” business with my wife. We operated it for five years, and then got out of that, sold it last year.”
2. How has your consulting and operational experience shaped your investing?
“I think you just, you try to get more context on what’s actually happening. You know, it’s easy to be a spreadsheet jockey and come up with all these numbers, but I think you got to really know the nuance on what’s happening within those companies. And especially when you’re going small cap, these are messy companies. A lot of them are just trying to tie things together. Some of the last things that they’re really worried about is how they put the polish on the IR deck, at least if they’re probably doing the right things. They’re actually focused on executing, they’re not too worried about what their investor focus is or how they’re engaging with with that cohort. Having exposure and having exposure across really large and medium and small cap has been a benefit, and really helps in talking with management and getting a better understanding of the business.”
3. What is your core investing framework?
“Deep value with Catalyst. Something that you have the value component there, but there’s a catalyst is where I like to focus on in any company that I’m investing in. There has to be a reason why it’s undervalued. And by and large, the market’s pretty efficient, and there are lots of smart people swimming around. So you really have to have some kind of contrarian edge, or contrarian take on, you know, why? Why you’re the lucky one to be able to stumble on on this security. But, yeah, it’s a deep value with the catalyst. But I’m not against a long term compounder that I think I can forecast into the future. And see what the growth and how that will result in a great investment opportunity in the current state.”
4. What role does capital allocation play in your decision-making?
“Yeah, absolutely. I think that that’s probably the most important thing I’m trying to understand… this company is producing X amount of cash. Where’s that cash gonna go? How’s it going to find its way back into my pocket? Or, how are you going to be able to grow this in a way that that makes more sense than putting that into my pocket?”
5. How do you use AI in your research process?
“AI is just great leverage… It’s kind of like having a high powered research analyst right next to you, and you’re able to get near instantaneous information. I use it on just standard prompts that kind of run in the background and send me reports, plus just using it in my research process throughout as I have questions… Maybe it comes down to what is critically important in any investment as well. You have to know what’s critically important for this to work out. And then you need to go and verify it yourself… It’s a great servant, but it’s a terrible master.”
6. What makes public markets uniquely attractive?
“That’s kind of why I went back from private to public markets… because you can change your mind. When you’re operating a private company, you might change your mind, but you sure as hell better be coming and figuring out how to rally a team to make this a more successful enterprise, because, if not, the whole thing’s going to be a house of cards that falls over the top of you. I think there are two beautiful things about public markets:
One is that you could change your mind, and unless something changes, you’re not terribly handicapped or hurt for new retail.
Two, it’s not a zero sum environment. It’s actually a positive sum environment to go out and talk to different investors and to share different ideas and to grow it together, because you’re incentivized to bring people on board, and hopefully the share price rises over time, and you’re able to benefit of that instead of in the private markets.”
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