To celebrate 10 years since the launch of the Planet MicroCap Podcast, I’m going back through our archives to share with you episodes of the podcast that either: garnered the most downloads/views in our history, stood out to me for the subject matter, the first appearances of regulars and/or that I think you’d really appreciate either re-visiting or for some of you, hearing/watching for the first time.
Geoff Gannon is the Co-Founder and Portfolio Manager at Focused Compounding. You might also recognize Geoff from the very popular investing podcast, Focused Compounding, which he co-hosts with his partner, Andrew Kuhn. I’m a big fan of their work, and I invited on Geoff to share his background and to chat about his investing philosophy.
Watch on YouTube:
Summary below:
I. Foundations of Value Investing
Early Exposure and Intuition
Gannon's journey into investing began in his teens, inspired by a magazine article about Benjamin Graham. His approach naturally gravitated toward assessing the intrinsic value of businesses over chasing hype.
“My dad actually had read a magazine article that mentioned Benjamin Graham... and so I started reading about Ben Graham and that got me interested in value investing.”
“Valuing a stock by looking at the entire company—what it’s worth and the financial statements—instead of what people were doing in the late '90s with new issues and IPOs.”
II. The Power of Overlooked Stocks
What Makes a Stock Overlooked?
Gannon defines "overlooked" by two metrics: low share turnover and low beta. These are often microcaps not followed by analysts, not in indexes, and sometimes not even SEC-registered.
“We know it’s overlooked when it has both low share turnover and low beta.”
“It’s often a sign that there’s long-term holders—founders or family—so not many shares are trading.”
III. Seeking Moats, Not Just Metrics
Focus on Quality and Competitive Advantage
While disciplined on valuation (rarely paying over 13x earnings), the core of Gannon’s strategy is finding stable businesses with economic moats and low competitive risk.
“We look for less competitive businesses—those with higher retention and stable margins.”
“We’re looking for something that suggests competitors can’t ruin their business quickly… you’d call it a moat.”
Example: NACO’s coal operations, which are co-located with customer power plants, offer protection through long-term contracts.
IV. Management Matters—But Keep a Distance
Judging by Actions, Not Interviews
Gannon avoids speaking directly with management, preferring to evaluate their capital allocation history and whether they prioritize per-share value creation.
“I avoid speaking to management directly... I focus on their capital allocation and strategy.”
“Do they issue shares? Do they think in per-share terms? That tells you a lot.”
He flags risk in owner-operator microcaps where management may take the company private at a disadvantage to minority shareholders.
V. Concentrated Portfolio Strategy
Five Stocks, Full Focus
Focused Compounding typically owns five stocks. This extreme concentration is by design—it allows them to stay within their circle of competence and focus only on the best opportunities.
“People say they’re concentrated until we tell them we own five stocks.”
“I can often find five companies well protected from competition... I can’t find a lot more at the prices I want.”
VI. Absolute Returns Over Relative Gains
Ignore the Benchmark
Gannon urges individual investors to focus on their own return goals—not beating the market—especially in later bull markets when pressure can lead to excessive risk-taking.
“Focus on your own returns and not compare yourself to the market.”
“Eventually you’ll take risks you shouldn’t if you try to match market performance.”
VII. Lessons from Market Downturns
Enduring Wisdom from Crises
Experiences during the early 2000s crash and the 2008–2009 financial crisis reinforced Gannon’s commitment to high-quality, stable businesses.
“The reason for sticking to less conventional investing is memories of those times.”
“2009 was the first time I remember buying really high-quality companies at really low prices.”
VIII. Bank Analysis: The Liability Advantage
Cost of Deposits Over Assets
When analyzing banks, Gannon focuses on the liability side—specifically the cost of deposits. He prefers institutions with scale advantages like Frost or Bank of Hawaii.
“I look at the liability side of deposits... who has the lowest cost of deposits.”
IX. Essential Investing Literature
From Graham to Greenblatt
Favorite books include Greenblatt’s You Can Be a Stock Market Genius and Peter Lynch’s work for new investors, along with Graham’s Intelligent Investor.
“My favorite is You Can Be a Stock Market Genius. For beginners, probably Beating the Street.”
X. Challenges in the Hunt for Microcaps
Sifting Through the Noise
Identifying worthwhile stocks on platforms like OTC or Pink Sheets requires effort—most are quickly dismissed as uninvestable—but the rare gems make it worthwhile.
“The disadvantage is I’m looking through 19 stocks I can instantly tell aren’t worthy of investment.”
XI. Launching the Fund
New Chapter with Willow Oak
Gannon and his partner are launching a private fund in early 2020 in partnership with Willow Oak Asset Management. The fund will formalize their strategy and extend their reach.
“We’ve managed separate accounts for about a year and a half... This with Willow Oak is a fund launching in January.”
Planet MicroCap Podcast is on YouTube! All archived episodes and each new episode will be posted on the Planet MicroCap YouTube channel. I’ve provided the link in the description if you’d like to subscribe. You’ll also get the chance to watch all our Video Interviews with management teams, educational panels from the conference, as well as expert commentary from some familiar guests on the podcast.
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