Planet Microcap 2025：Caro-Kann Capital 的 Artem Fokin 问答

All right. Hello and welcome to the yet another value podcast. You are about to listen to a special episode. This is a recording of a 30 minute Q&A keynote interview I did with my friend Artem Fokin from Carol Capital. Uh Artem is a super thoughtful guy, one of my favorite people in the industry to talk to. We did this towards the end of April. We had the video and you know I think people enjoyed it. Maybe they were just blowing smoke up my butt. Who knows? But we figured, hey, we've got the video. Let's toss it on the podcast feed and let people get to know specifically how Artem thinks about things because uh again he's just one of my favorite people in the industry, one of the most thoughtful people I know. So uh you're going to have that on the back end of this. Uh there's a disclaimer video all the way at the end of this thing. But first, a word from our sponsor. This podcast is sponsored by FinTool. Look, those of you who have followed me on the blog, on the podcast, know that the two areas I've probably thought the most about over the past couple months is AI and corporate governance. And look, if you are not using AI, you are getting left behind. And let me just marry those two thoughts in one way. If you read through proxies, there's one thing that you know proxies contain a lot of information, but they suck. companies are almost intentionally obsuscating and burying a lot of the interesting information here. Guess what? You can use AI to really cut through the noise there. So, FinTool just released a thing. You can go do uh a deep dive into every person in a company's executive roster. So, you know, if I'm looking at a company, I can go to the FinTool people tool. I can look at their CFO and I can see, hey, here's exactly how much he's paid. Here's everything that he's done. Here's everything that's been included about him in the proxy for the past five years. Here's all those key incentives points summarized, laid out so that you know what used to take me a day of going through 12 different proxies and looking and mashing and saying, "Was he on this board? When did he join this board?" It takes 15 seconds. So look, go check out FinTool, start using AI. You are going to get left behind fast if you are not using AI as a fundamental investor. Uh FinTool they really interesting product and it continues to evolve.

Next up, I'd like to introduce our keynote Q&A here at the Planet MicroCap Showcase in Las Vegas, in partnership with MicroCap Club. This is my favorite podcast that I listen to in finance. I've had the pleasure of working with Andrew for the last few years, and I really enjoy all the work that he does, how much time and energy he puts into preparing, and the amazing conversations he has on individual ideas.

So, we'd love to introduce Andrew Walker, host of Yet Another Value Podcast, and his guest, the inimitable Artem Fokin.

Thanks everyone for being here and listening to us ramble for 30 minutes. I'm excited to be joined up here by my friend, one of my favorite people in finance, Artem Fokin. I'll introduce him. He doesn't know this, but he is one of 2 people in the world that I probably talk to 3 times a week on the phone.

Sometimes I dodge his calls because, when I'm talking to him, I have to be so mentally on that it can be draining. If I'm having a tough day or I'm tired, I'm like, "Man, I can't deal with Artem right now because I have to be on my game. I can't be multitasking. I have to be ready." He's just such an insightful investor and one of my favorite people in finance.

Artem, let's get this started. We've got 30 minutes to talk. In our calls, I have shamelessly stolen this from you. You were the first one to talk to me about it, but when you and I talk, a lot of times you'll talk to me about investments or companies we're looking at and having them fit into what is your superpower.

I'd love to start this off by having you define what we mean when we talk about using your superpower in investing.

Sure. You're welcome to steal my ideas as long as you want and as much as you want. Some time ago, I came up with this idea of an investor superpower. The premise is that every investor has a superpower. Why is that? Because I define it through comparative advantage, using economist Ricardo's terminology.

Every investor has a certain skill set and certain tools, and one of those skills is usually dominant while the others are not as strong. That's your investor superpower. To be clear, you don't have to be in the top 1% in the world in that specific skill or trait of the trade, but it has to be more robust in your own toolkit than everything else that you have.

The consequence is that, in my opinion, once an investor identifies his or her superpower, the ideal outcome is to tailor the idea generation, research, and positions in the portfolio to that superpower.

Why don't you talk about what you think your superpower is, and then we can dive into that a little bit further?

I think my superpower is matching a conceptual framework about the business model of the business with evidence that I collect from various, dispersed sources.

For example, there's one company that you and I have talked about privately a number of times and that we have in the portfolio. I probably read about 70 expert calls and did around 10 of my own. Since then, that number has only grown, so probably now it's closer to 95. I was able to get discrete data points—discrete pieces—and match them with the framework in my head about what makes this business very strong.

When you look at other investors, are you able to identify what their superpower is when you're talking to them or looking at their portfolio?

If I spend enough time with an investor talking and discussing ideas, I think I can usually have a good guess as to what that investor's superpower is.

When you talk to another investor, do you think the best investors you've spoken to have identified their superpower and use it to swing at the pitches that are fattest for them?

My suspicion is that they have a good understanding of their superpower, even if they don't frame it that way. That understanding can be explicit or implicit.

The chess analogy would be Garry Kasparov, the 13th world champion. He knew his style, and he knew which types of positions on the board he played best. He doesn't—remember, this is the chess champion, so he's strong at everything—but a certain type of position plays better to his personality and style.

By the way, I also believe that the superpower is usually linked to what you love doing and to who you are as a person.

No, look, that's what is so interesting to me. I see a lot of investors, and when I talk to them, I'm like, "Oh my God, this guy is so good when he's analyzing real estate stocks," or, "This guy is incredible at analyzing coal companies."

Then I talk to them, and all they want to talk to me about is, "Hey, man, I'm really interested in Apple LEAPs," or, "I've been spending a lot of time thinking about Tesla." I'm like, "Man, you are so good when I talk to you about real estate or whatever it is. Why are you even going out and doing that?"

The reason the superpower concept that you've talked about has resonated so much with me is that I think about it in my own investing. I'm like, "Hey, here's something that I think I'm really good at, but I love to look at all these different things." I feel like I need to be more focused on what my superpower is. Does this company fit into my superpower? How do I do that?

That's why it has resonated so much with me in talking to you. And yeah, I don't know if you want to say anything else about the superpower.

I think that's all about superpower.

One more question. When I asked you about your superpower, you said, "Here's this company. I read 70 expert calls. I did all this work." Is reading expert calls part of your superpower? How does that particular activity—which I think is the basic blocking and tackling of understanding a company and industry—fit into your superpower?

I think it's not about reading per se. It's about extracting information and putting that information into the right buckets.

By the way, in that particular case, I heard the pitch on your podcast. This is how I first found out about a next-generation version of the thesis. I knew about the company and had heard 2 prior theses before, but when I heard the 3rd generation of the thesis on a podcast, I thought, "That's interesting."

Then I went to work. In that particular case, I started reading earnings calls, had a historical model, and then I went to expert calls.

Let's switch to—you just mentioned a company that you listened to 2 pitches on and have done 100 expert calls on. One thing that I've personally struggled with is selling a company when a position changes.

We're talking here, and the Russell is down 20% in 4 months. It's very easy to say a stock is down 20%. It's hard to know: has the thesis broken, or is it just soft macro? Was that a bad quarter, or was that a sign that the business is deteriorating?

I'd love to start talking to you a little bit about this. When you've done so much work on these companies and you've got a company that's down 10% and reports a disappointing quarter, how do you separate, "Hey, this is just a bump in the road," versus, "Hey, this is a company where something has materially changed, and I need to reassess, I need to sell, I need to get out"?

If I don’t, I’m kind of just sucking my thumb and hoping for the best.

I don’t think there is a silver bullet, and it’s always difficult to do. I would like to say that it gets better and easier over time, but I’m not sure that it does, even though you have more experience.

There are a few tools, in quotes, that I’ve found helpful. Number 1 is going back and reviewing your notes if you spoke with management, or reviewing earnings-call transcripts and conference-call transcripts, and seeing what management said 6 months ago or 12 months ago versus what happened. That is a very valuable exercise. Do not rely on your memory and your own recall.

I have a very strong recall, but I’ve always preferred checking the notes and seeing what happened. I mention that it’s almost as if you’re collecting evidence to prove a case: whether management is at fault—“fault” in quotes, meaning they did not execute—or whether it’s an external environment, and whether those changes in the environment are temporary. In that case, you probably should hold the stock. Or are they permanent? In that case, the world is different.

The company that might have had tailwinds before no longer has them. If your thesis was dependent on a secular-growth story and now it’s not a secular-growth story, it’s probably time to leave.

It’s funny you mentioned that because we were talking right before this about a company that went poorly for me. One of the things that happened was exactly what you said: in Q1, they said, “This is going to happen this year,” and then in Q3, they said, “No, it’s probably going to happen next year.” Two years later, it’s always 6 months in the future.

What they said would happen, and what they said they would execute, never played out. If I was being honest with myself, I would have said, “The thesis broke 18 months ago,” and you kind of just sat there waiting and hoping for the best. But your thesis didn’t play out.

When you talk about reassessing the companies, you invest all up and down the spectrum. I’d love to talk to you about how that impacts your investing in a second, but do you need to give different amounts of rope and different amounts of leeway to a microcap company versus a large-cap company? Can you give a little bit more leeway to the large-cap company just because it has more resources?

If they said they would do something in Q2 and it’s going to be a Q3 thing, is that not as dramatic as it would be for a microcap company with fewer resources, less cash, and less availability? Or do you have to give the same amount of rope to companies of all sizes?

The most accurate answer will have 2 words, and it’ll be very annoying: “It depends.” But now I’ll try to generalize.

I think it’s fair to give more leeway to a smaller company. They have fewer resources and fewer people on the team, and they may have gotten distracted by other priorities of running the business. However, that leeway cannot be infinite. There are limits to that, and at some point you need to say that this management team may not be able to execute at the level that you believed they would.

Alternatively—and this is actually a lot more difficult to identify—the management team that kept executing and growing a company, hypothetically from $1 million to $10 million and from $10 million to $50 million, may have just hit the ceiling of its natural abilities. It cannot grow beyond those $50 million. It is not the right team to take the company to the next level.

You know, I hear a lot of people talk about management teams that, as you said, are really good at running a business out of their garage, or going from 1 to 10 employees or from 10 to 100 employees. That skill set might be different from going from 100 to 1,000 employees or from 1,000 to 10,000.

Do you think the management team is lacking the capabilities to manage a bigger organization? Once you get over 100 employees, you don’t know everyone’s name anymore. You have to delegate a lot more.

Or I always wonder: do you think it’s more likely that the business model has run into issues? Once you hit $50 million in revenue, there aren’t a lot of businesses that can grow beyond $50 million. If you’re running a restaurant, maybe you can have 3 restaurants in the market and hit $50 million, but beyond that, the market just can’t support more than 3 restaurants. So it’s not the management team that’s the issue; it’s the business, the TAM, or the expansion.

I think it’s so context-specific that it would be very difficult to generalize. The best test is whether that management team leaves, a new management team comes in, and they can grow. If they can, then the answer is obvious: it was the management team.

If you try a new management team that, in your opinion, has a historical track record of running bigger businesses and growing bigger businesses, and they could not get it done, then it was probably the industry, market structure, or market share.

Let’s go back to exiting a company once the thesis has changed. Can you give me an example recently of a company where you had a thesis, 9 months went by, 2 years went by, whatever, the thesis hadn’t played out, and you had to change your mind on it?

I can give an example without naming a company where I changed my mind in less than 9 months. I changed my mind in probably about 2 months.

I realized that I had most likely made a mistake, and it was not a microcap. It was, in round numbers, a $2 billion market-cap company. In that specific case, my investment thesis had 3 or 4 premises, and I think I got very strong evidence that at least 2 or 3 of those 4 were no longer valid as of right now.

That could change. Maybe I just needed to give more leeway, even though, in my opinion, the company had already had a lot of leeway over the last 12 months. I became an investor a lot later, after the company’s share price had crashed, and I was pretty fast to leave the party after about 2 months.

Let’s go again to the fact that you invest all up and down the market-cap spectrum. When you’re investing in a microcap—a company that might be pitching here—versus companies we’ve talked about that are $5 billion-plus, how does your investment process differ when you’re investing in a microcap, small-cap, or large-cap company?

Talking to management a lot more regularly with microcaps is a lot more critical. Understanding the depth of the management team and the bench is a lot more important. If you’re looking at a company with a $2 billion, $3 billion, $4 billion, or $5 billion market cap, it’s probably safe to believe and assume that there is some bench in terms of talent behind the CEO. If anybody leaves, they probably could replace that person with an equally qualified human being.

When you look at microcaps, I don’t think it’s always safe to assume that there is depth behind the CEO and CFO. Understanding that is a lot more important. I think that’s the big difference between the market caps.

Do you demand a different return profile when you’re looking at smaller-cap or microcap companies versus larger-cap companies?

I don’t think I, per se, request a higher return, but I do force myself to be more mindful about risks. I need more conviction in the microcap idea than in a small-cap idea or a midcap idea.

Plus, the liquidity profile is also different. Exiting a $2 million company, if you believe you made a mistake, is pretty easy, let alone something bigger. Exiting a microcap company if you’re wrong is very, very difficult.

I’m frequently surprised by how easy it is to get into a $100 million market-cap company and how difficult it is to get out of the same $100 million market-cap company. If it’s difficult to exit, most likely, in that case, it’s not a $100 million market-cap company anymore. It’s probably $50 million. But that’s why it’s more difficult to exit.

The reverse is also true. If you buy a company with relatively limited liquidity and, let’s say, it’s a $100 million market-cap company, just to use round numbers—it can be $200 million as well—if the fundamentals do well and the company grows its KPIs and financial metrics, when you need to exit and it’s a $400 million, $500 million, or $700 million market-cap company, that’s actually a lot easier than building a position to begin with.

What about the return profile for microcap versus large-cap companies? International investing has always been here, but it’s getting particularly popular among microcap investors. We just did the microcap stock pitch, and of the 10, 4 were international-listed companies.

Multiple companies presenting this week that people are really excited about are internationally listed—Israeli, Swedish, wherever. Do you demand different return profiles and different liquidity profiles when you’re looking at an international company, whether it’s a microcap, large-cap, or whatever, versus a domestic company?

Only if that company does business in a currency that is very unstable. In other words, most likely it will be an emerging-markets company, but I usually don’t invest in emerging-markets microcaps. I may invest in emerging-market midcap or large-cap companies.

We have at least 1 portfolio position in a company where the currency has historically been depreciating against the U.S. dollar. So you need to model the depreciation accordingly.

I don’t particularly like investing in emerging-markets microcap companies. I like investing in microcap companies outside of the U.S. in developed markets. I think that 1 of the reasons why many U.S. investors started gravitating toward non-U.S. and sometimes even non-English-language countries is because the venture-capital ecosystem and growth equity as a sub-asset class are massively less developed in those countries than in the U.S.

Mm-hmm. In the US, we are often dealing with adverse selection, meaning the best companies usually raise capital privately and sit around Series A, B, and C. By the way, there are about 26 letters in the English alphabet, so you can be raising money for a long time in the private markets and delay going public for a long time.

There is this adverse selection that I think hurts micro-cap investors in terms of selection. Thankfully, venture capital is not as robust in many other countries, and many great companies become public very early.

Obviously, with Sarbanes-Oxley, it’s been 20 years, and the cost of being public has gone up exponentially for investors. I hear a lot of investors talk about the Russell 2000 as a flawed benchmark because the good companies graduate out of it. There are no new companies coming in to supplant it with fresh blood.

If the market cap is $150 million, all the good $150 million micro-cap companies are staying private for longer. They’re doing all of these rounds. You can even take away the Russell 2000 and talk about micro-caps. There isn’t going to be an exciting $75 million market-cap company. Do you worry that the market structure of the US is just so far tilted afield for micro-caps that you’re playing a negative-selection game with them?

I don’t think it’s Sarbanes-Oxley. I think the amount of assets raised by venture funds and growth-equity funds over the last 15 years plays a much more important role than just the Sarbanes-Oxley Act and increased compliance costs.

Let’s switch.

I’m not worried that much because my goal is not to find 300 amazing micro-caps. My goal is to find a handful. I’m hoping and believing that there are still a handful of those out there.

No, look, I agree, though. I just always worry from a game-theory or game-selection perspective. If you said, “Hey, there are 300 of these companies over here, and 290 of them are just complete crap. Go find the 10,” versus, “Hey, there are 100 normal companies over here, and 20 of them are going to be good,” I’m just really worried about going and looking through the 300. I’m very worried about that negative-selection bias. Saying no often is a good skill.

Let’s switch. We’re talking April 22. The Russell is down about 15% on the year. We’re talking April 22 after hours. Trump might have said he’s putting 50% tariffs on everyone or taking all the tariffs off, so it could be up another 10% or down another 10%. Who knows? You and I have been up here for 15 minutes. The world’s changing.

I’d love to talk to you a little bit about something you and I talk a lot about in our private talks, and that’s investing as a mental game: dealing with drawdowns, building resilience, learning from drawdowns, and all that sort of stuff. I’ll turn it over to you to start. What do you think about resilience in investing when you’re handling a drawdown or one of the more volatile markets we’ve seen in the past 20 years?

First, I do believe that investing is a mental game—a mental sport, or mental activity. And why? It’s because investing is mostly about making decisions. Sure, we spend most of our time during the day researching, talking to management teams, talking to people in the field, talking to experts, doing modeling, and talking to our peers. But the ultimate output of all that activity is your decisions about the portfolio: what to buy, what not to buy, what to sell, what not to sell, what to trim, and what to add.

Those decisions will drive your returns, for you and your investors, if you manage outside capital. That means keeping a straight head even when you’re in a drawdown and knowing how to deal with your emotions are critical skills. I think resilience is one of the most important skills, or personality traits, for an investor because it’s pretty unquestionable that you either had a drawdown, are in a drawdown, or will have a drawdown at some point. There are very few exceptions in the world.

How you deal with that, and whether it will impact your decision-making abilities—whether you go on tilt or not—that’s what really matters.

You mentioned going on tilt, and what I find hardest about a volatile market or having a drawdown is that Company X, which you follow and have a position in, is down 20%. We talked earlier about knowing when to eject. If you sell, are you selling because, in the moment, you’re scared or panicking? If you buy, are you buying because, “Hey, I think this is an attractive opportunity,” or are you buying because you want to take a YOLO? You just want to double down and take a position.

I find it really difficult, especially when markets are very volatile, to step away, think coldly and rationally, and say, “What is the best opportunity?” It really starts to affect your mental game, as you said. I’ve seen investors have trouble swinging the bat after big drawdowns because they’re too worried that they’re going to do a YOLO.

I’ve also seen investors have a big drawdown. One mutual friend of ours, I think, has written about how, at the end of his fund, he was down a little bit, and then all of a sudden he made a couple of bad investments and was down a lot. With the benefit of hindsight, he was betting on companies that he would have never invested in, except he was having a drawdown and wanted to increase the variance of his portfolio to get there.

So how do you deal with the doubts that come from handling a drawdown? The doubts of, “Am I swinging hard enough, or am I swinging too hard because of this drawdown?”

Whatever I say right now will sound too generic, and without specific context it probably will not be helpful. So let me answer your question in a different way. Let me answer it from a more practical, procedural perspective and explain what I have found helpful for me over the years. It doesn’t mean that it will be helpful for you or someone who is listening here.

Number one is: Is there an avenue for you to express your thoughts and have someone hear them and point out your blind spots? For example, having a coach—an executive coach or performance coach—is a good idea, in my opinion, because we’re not talking about coaching on investing. We’re not talking about, “Oh, this is a great idea, and you did a proper analysis of the margin profile and growth drivers.”

We are talking about helping you identify, in your mental game, how you can be the best and whether you are on tilt right now, which is why you’re swinging too hard and making an investment that you would not have made before because it does not meet your quality criteria. Or whether you’re doing your job: you’ve done your research, you’ve reached a conclusion, and it’s okay that you made some mistakes in the past. Everybody makes them.

You’ve done your analysis. It’s a great idea. There are no guarantees in investing or in life in general, but it’s okay to invest right now. You are not doing a crazy, stupid thing.

By the way, that may not be a coach. It may be a group of peers with whom you talk, who ideally understand you and understand your psychology, and also understand your typical investments—where you make money and where you lose money. That’s the second tool.

Some people find journaling very useful. I don’t journal much, but the difficulty today is that you need to draw those insights yourself, and it may be more difficult, especially in the moment, in the heat of battle. Not many people will say, “Let me go open my journal,” whether it’s on paper or digital, review it, and say, “No, I’m on tilt right now. I will not make this investment.” So that’s another tool.

The third tool—and this is more general about resilience—is that it’s okay to admit that you make mistakes. The best way for me to frame it is to think about people who achieved greatness in their field, maybe investing, maybe not investing. They’re at the top of the mountain, and then you think about the moments in their careers where they fell very far down from the top and how they came back.

The story that you draw from that—and this is where I personally derive inspiration—is to say, “Okay, this person is great, or outstanding, and he or she is still outstanding despite messing things up in the past and going from being very good or great to being down and then recovering.”

By the way, it doesn’t have to be from investing. There are some people in the Western world who, in my opinion, showed incredible resilience, and you look at them like, “Wow, I really admire this person because of what he has overcome and how he came back when everybody was against him.” People may guess who I’m thinking about or not. Or you can get an example from a non-investing field. It can be sports; it can be anything.

For example, I mentioned Garry Kasparov, the 13th world chess champion. I like going back to the story of when he was playing in 1984. He was a challenger against Anatoly Karpov, and Karpov had a lot of support from the Soviet government. They were playing a match, and whoever got 6 wins won the match.

Kasparov was down 5–0. Nobody should be able to come back. He actually came back and made it 5–3, and then the match was interrupted for whatever reasons. We can only speculate and have strong suspicions why. Later, he won the next match.

Let me ask you one more question, slightly related. I think a lot of the people here are either professional investors or private investors, but their investing income is a big piece of their livelihood. One thing I don’t hear discussed publicly a lot, but you and I talk about it, so we might as well do it in this 3-minute public conversation.

How do you think about your income being derived from your portfolio, your funds, whatever it is? How do you think about the personal finance aspects of the pressure of a market, especially during drawdowns?

It’s very difficult, and there is no way around it, because not only does your income, broadly defined, depend on your performance, but most small and emerging managers also have the majority of their own net worth in the fund. So they’re not diversified, like I’m not diversified. Probably you’re not diversified. That’s a lot more difficult, and I don’t think I have any particularly strong tools that are unique to share about how to deal with that, except for what I already mentioned: thinking about your portfolio and what you’re doing.

This is an obvious one—this is personal finance 101. I think if your spouse, for example, works in a field that is unrelated and has very little correlation to your own performance, that probably helps.

I’ve heard advice to take several years of your living expenses, put them into Treasuries, and keep them there. Typically, I have not done that, but I think it’s very good advice once you’re in that situation.

My spouse works in the public school system, so I’ve just got that sweet, sweet public-school-system fallback money to rely on. You’re golden.

No, it’s funny. When I was launching the fund, I talked to a lot of managers, and I hear 50/50. I’ll hear people who say you should have all your money in your fund, and I’ll hear people who say you should have none of your money in your fund, because if all of your money is in your fund, you’re going crazy with every drawdown.

So, as I’m getting to wrap it up, is there anything we didn’t talk about that you want to leave people with? Or do you want to respond to that last question, that last comment I had?

No, look, first of all, I’m very happy that Alicia helps you diversify. That’s fantastic. You married well.

My personal opinion is that the majority of one’s personal money should be in the fund, but over the years—and this is where my thinking has evolved—I think it’s healthy to have 1, 2, or 3 years of living expenses in something that’s just like cash equivalents. To be clear, I don’t have that setup, but I think at some point I should probably do that.

It’s funny. We end here with—we went from talking about investing to personal finance advice. We’re not financial advisers, but look, 5 minutes in, I was worried: How are we going to fill 30 minutes? And then we’ve gone way past 30 minutes.

Artem, I always enjoy talking to you. Thanks for coming up here and doing this publicly with me, and thanks, everyone, for listening to us ramble.

Thank you, Andrew.

A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.