Nov 4, 2026 · 25 min
Rasmussen finds value beyond America’s biggest stocks
The World’s Cheapest Stocks by Dan Rasmussen
Global microcaps offer a wider opportunity set, but investors must overcome sparse information, unfamiliar corporate cultures, and difficult market access.
- 1Broad diversification matters because microcap growth and future outcomes are unusually difficult to predict.
- 2Multilingual research and AI translation can reduce information barriers in markets such as South Korea.
- 3European microcaps look attractive when disciplined management meets depressed valuations and stronger returns on capital.
Don't miss
Rasmussen contrasts Europe’s familiar corporate culture with Japan’s large cash balances and limited shareholder distributions.
The brief
Dan Rasmussen of Verdad Advisors makes the case for looking beyond the United States, where global microcaps expand the opportunity set but complicate research and portfolio construction.
Because company growth and future outcomes are hard to predict, Rasmussen argues that global microcap portfolios should favor broad diversification over concentrated bets.
Language and disclosure gaps are practical obstacles, not abstract risks: multilingual researchers and AI translation can open markets such as South Korea to deeper analysis.
Rasmussen sees European microcaps as especially compelling when disciplined management and strong returns on capital meet depressed valuations, while Japan presents more unusual shareholder practices.
The discussion closes on implementation, including the information and trading barriers facing North American investors and Rasmussen’s recommendation of Interactive Brokers for overseas access.
What was said on this episode
46 statements · 40 positive · 4 negative · 2 neutral
U.S. microcaps represent a small share of the global microcap opportunity.
“The U.S. opportunity in microcaps is a very small percentage of the global opportunity set, even though the U.S. is 65% of global market cap.”
Listen at 1:13
Institutional investors cannot participate effectively in very low-volume microcap stocks.
“they can't play in something with $250,000 of daily volume. We can play there.”
Listen at 1:48
Institutional trading constraints create research opportunities in microcap stocks.
“This creates an opportunity because who is going to do really deep, rigorous research on a stock?”
Listen at 2:06
Rigorous analysis can make an investor unusually knowledgeable about microcap companies.
“if you can apply a level of rigorous analysis, you can very well be the smartest person on a name.”
Listen at 2:21
South Korean cheap microcaps trade at approximately two times EBITDA.
“in South Korea you can buy them for 2 times EBITDA.”
Listen at 3:19
South Korean cheap microcaps trade at approximately 0.43 times book value.
“in Japan at 0.77, and in South Korea 0.43 times book.”
Listen at 3:34
South Korean microcaps trade at approximately 0.43 times book value.
“in South Korea 0.43 times book.”
Listen at 3:37
Global deep-value microcaps offer free-cash-flow yields reaching 11% in South Korea.
“global deep value ranging from 7% to 11% in South Korea.”
Listen at 3:46
Value-factor premiums are approximately zero or negative among larger-cap stocks.
“if you were to cut this off at $100 billion or $50 billion, the premium would essentially be zero. or even negative.”
Listen at 4:36
The U.S. microcap value premium reaches 12.5% annually.
“if you're willing to go down again into micro caps, the premium goes up to 12.5% annualized.”
Listen at 5:11
Quantitative factors have historically worked best in microcaps.
“This is actually a persistent finding across all the academic quantitative factors. They always work better in micro caps, the next best in small and best in large.”
Listen at 5:56
Academic quantitative factors perform best in microcaps across market-cap categories.
“They always work better in micro caps, the next best in small and best in large.”
Listen at 6:00
Japan is Rasmussen’s preferred market for microcap investing.
“Japan, the one exception, my favorite market as a result.”
Listen at 7:35
Buying small, cheap, high-quality Japanese microcaps has paid off consistently recently.
“Japan is the one market we're buying small, cheap. high-quality microcaps has paid off actually quite consistently over the past few years.”
Listen at 7:40
Global microcaps continue to have relatively strong fundamentals.
“the fundamentals of these microcaps are still pretty good.”
Listen at 8:33
Microcaps have approximately a 10% fundamental yield versus 9% for the S&P 500.
“the S&P 500 is about a 9% fundamental yield. Microcaps, 10. Now you can see the composition of that very different”
Listen at 9:03
Fundamental yields are approximately 11% in Europe, 14% in Japan, and 17% in South Korea.
“You go to Europe, 11, Japan, 14, South Korea, 17”
Listen at 9:13
South Korean microcaps have fundamental yields more attractive than the S&P 500.
“South Korea, 17, right? So you can buy free cash flow yield plus growth, these fundamental yields that are more attractive than the S&P 500”
Listen at 9:16
Starting microcap valuations predict subsequent benchmark-relative returns.
“these starting valuations predict forward returns”
Listen at 10:50
South Korean microcaps are near their historical cheapest relative valuation versus large caps.
“South Korea, we're at the 10% mark, so this is among the cheapest that microcaps have ever been relative to largecaps.”
Listen at 11:27
U.S. private equity is more expensive than the S&P 500.
“private equity is actually more expensive than the S&P 500”
Listen at 12:40
Passive-investing flows are disproportionately allocated to U.S. large caps, especially the S&P 500.
“most of the flows that go into passive actually end up being allocated in an overweight way to U.S. large caps into the S&P 500 index in particular”
Listen at 13:29
Overweighted markets should experience lower future returns.
“where people tend to be overweight, in theory, should depress future returns”
Listen at 13:52
Capital outflows raise financing costs and should increase future returns.
“places where money is flowing out, the cost of capital is going up and future returns should go higher.”
Listen at 13:59
Many international microcap companies have low valuations despite solid growth.
“you can find hundreds if not thousands of companies that are trading at ridiculously low valuations that are still growing quite solidly”
Listen at 14:20
Microcaps’ prospective returns appear substantially higher than their historical returns.
“forward returns and microcaps look a lot higher than trailing returns”
Listen at 14:39
Investors should expand microcap research beyond the United States.
“we should be looking abroad. We should be looking at Japan, at Korea, at Europe, and expanding our purview and Canada beyond the purviews of simply focusing on the United States.”
Listen at 14:47
Investors should expand microcap research beyond the United States into several foreign markets.
“we should be looking at Japan, at Korea, at Europe, and expanding our purview and Canada”
Listen at 14:48
Investors should use greater diversification to reduce reliance on individual microcap outcomes.
“a little bit more diversification”
Listen at 16:04
Microcap positions should be capped relative to average daily trading volume.
“you want to be able to get out. And that means having some sort of cap on average daily volume, whether that's five times daily volume or ten times daily volume”
Listen at 16:38
AI translation has largely removed language barriers to investing in Korean microcaps.
“With AI, the barriers to entry for you to invest in Korean microcaps, for example, that might have existed in the past are essentially gone”
Listen at 17:31
European microcaps have relatively attractive returns on capital.
“European microcaps actually have quite attractive returns on capital.”
Listen at 18:11
European companies are generally well managed by international standards.
“European companies tend to be quite well run by international standards”
Listen at 18:18
Japanese corporate-governance reforms focus on improving capital efficiency.
“corporate governance reforms, again, especially in Japan, are focused on this topic.”
Listen at 18:55
Japanese companies are reducing cash balances and selling cross-shareholdings.
“Japanese companies, in particular, are reducing their cash balances. They're starting to sell their cross-share holdings.”
Listen at 19:02
European companies are positioned to benefit strongly from improved macroeconomic conditions.
“These companies are like coiled springs.”
Listen at 22:15
Japanese regulators and the Tokyo Stock Exchange are forcing companies to reduce cash and sell cross-shareholdings.
“the regulators and the Tokyo Stock Exchange to continue forcing companies to reduce cash and sell cross-share holdings, and that's happening.”
Listen at 22:31
South Korea’s legislature is pursuing minority-shareholder protections and aligned family incentives.
“the legislature is very actively focused on things like minority shareholder protections. and ensuring the incentives for families are aligned.”
Listen at 22:40
Asia is experiencing a broad wave of corporate-governance reform.
“I think there's a wave of corporate governance reform happening in Asia”
Listen at 22:50
Current conditions are favorable for investing in Asian corporate-governance reform.
“it's actually a very, very good time to bet on corporate governance reform story in Asia.”
Listen at 22:54
Interactive Brokers is an exceptionally strong brokerage product.
“I think it's the most amazing product ever.”
Listen at 23:37
Interactive Brokers provides broad global trading access.
“they can basically do everything globally, and I love working with them.”
Listen at 24:15
AI systems can analyze Korean companies without language-based disadvantage versus U.S. companies.
“AI doesn't have language barriers. There's no difference for them and for Claude in analyzing a Korean company relative to a U.S. company.”
Listen at 24:30
AI can analyze companies without language barriers.
“AI doesn't have language barriers.”
Listen at 24:30
Claude can analyze Korean companies as well as U.S. companies.
“There's no difference for them and for Claude in analyzing a Korean company relative to a U.S. company.”
Listen at 24:32
The U.K. is among the cheapest global equity markets.
“the U.K. is one of the cheapest global markets out there”
Listen at 24:42
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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