Investing in micro and nanocap stocks via multi-factor strategies | Author of Ranking, Right On! | Education, No Advice.

Joined May 2025
Two years ago, I built a simple system based on just 7 factors. Since then, it’s been consistently outperforming. Backtests show it has outperformed every single year since 2002 — except 2019. I wrote a free e-book explaining the system. You can use it yourself. No paywall.
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I love this too.
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"Nobody has been able to do it the way I've done it...that doesn't mean it's wrong it's just you have to ask well why has nobody done it?"
Militia Capital's founder David Orr (@orrdavid) on the PM trait that signals groupthink: "If a guy is looking for outside affirmation, like he's looking for someone to tell him that, oh yeah, what you're doing is the right thing, that's a kind of tell of groupthink." "And people who do this tend to not perform well." "In hindsight with my mentor, now I can tell he was testing me. He'd try to push back in these ways that were very rigid. Like, no, this is wrong. You can't do this this way." "And I was just always thinking, I'm going to do it my way. I don't really care what you think, when I was sure." "He's saying that nobody has been able to do it the way I've done it, for example. But that doesn't mean it's wrong. You gotta ask, well, why has nobody done it?"
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Hedge Fund Manager David Orr (@orrdavid) on why he’ll back a delivery guy over a Harvard grad, as long as the track record is real. David Orr runs Militia Capital, a ~$480M hedge fund. ~50% annualized, Sharpe 2. “If you didn’t go to Harvard, they’re not going to give you money. They’re gonna lead you on for years.” We cover: - Edge is just reps. He's placed a few hundred independent bets every year since 2019, more in one year than a lot of hedge fund managers get in a decade. - The two-hour rule: if he can't decide on a stock in an hour or two, he skips it. When a trade goes against him, he quits. "The market said I'm wrong, I'm wrong." - 500 positions in his partition and zero notes. Some of his best shorts are down 40% and he's forgotten what the company does. - The Gogo lesson: he spent 100 hours on a short and was right on the fundamentals (it's now $2), but it ripped to $20 first. All that research made him stubborn on the way up. - The AI risk system: it groups the book into custom baskets like "Banks Done Right" and "yield traps," recalculated daily. A 25% bet can quietly become 45% in two weeks. - How Militia recruits PMs: 95% of track records are junk, and one cherry-picker ran 30 accounts and sent the best one. The PMs who make it include a game show winner, a Spanish government worker and a programmer, with 0.15 cross-correlation. - The best short seller in the world, quietly: 40% a year short only for years, and he still gets a tiny allocation at his fund. - Why multi-managers' real business is marketing. Collect $2B a year in fees on $100B and it's "mission accomplished," whatever the returns. - The long/short tax trick: harvest losses on losing shorts, and never cover one that's down 90%. No tax is due until it's delisted, which can take 10 years. - $150M raised from one email asking LPs for $100M. He says he could raise a billion but won't, and admits they "must have gotten at least somewhat lucky." - His AI stock map: hyperscalers locked customers into take-or-pay deals at ~35% return on capital. If compute prices crash 80%, the end customers get wiped out, not the hyperscalers. - Is investing 99% talent? For big alpha, almost entirely. Pod shop alpha is teachable, maybe for 1 in 50 people rather than 1 in 10,000. Highlights: 00:00 Intro 00:44 How AI custom factor baskets track dynamic correlation in levered portfolios 03:24 Sourcing non-consensus PM talent and verifying live Sharpe track records 07:24 Structuring carry and tax deferral to attract elite proprietary traders 12:50 Why institutional multi-manager platforms fail to back pure alpha 20:22 The two-hour research limit: Avoiding sunk-cost bias in short selling 27:58 Momentum screening vs deep value: Why top longs hit new highs 29:40 Why traditional finance books fail and what operator biographies teach 37:16 Why rapid technological adaptation beats traditional economic moats 39:26 Analyzing the AI trade: Why hyperscalers offer superior downside protection 44:57 Internalizing stock borrow desks to maximize net-of-fee fund compounding 55:25 Avoiding confirmation bias and why shorting revenue growth fails 01:01:42 Pod shop leverage factories vs raw discretionary alpha generation 01:07:12 Unplugging from market narrative feeds to preserve independent conviction
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wow, correlations are off the charts today... $IWM flat $QQQ and $SPY down hard $USO up while $XLE down $UUP flat $TLT up (and a nice rally) $XLP up hard huh...
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1/n Doing some research work for a short seller (small caps) via @P123Finance AI Factor (Machine Learning on PIT Factors) is key. The interactions between factors are too non-linear and too complex to come up with a rule set by yourself. And many assumptions are plain wrong: (1) "Short the worst quality stocks" → opens the door to disaster. It attracts too many shorts, they crowd, then they get hunted. Filter: make sure the stock has at least 1 analyst (analysts are usually not wrong; good shorts show terrible EPS estimate revisions). (2) "Short names below $1" → same. No bueno. (3) "Low turnover" → same. No bueno. You need 600–1000 % churn. (4) Lendings → Opinon from DeepSeek (I have no idea!) Counterintuitive, but lendings are actually a positive signal for a short. If a fundamentally weak stock is still lendable, it means institutions are still holding but doubt the position—the final sell-off hasn't happened yet. The sweet spot is a moderate Borrow Fee (5–20 %). If the fee explodes (>50 %), the squeeze is on—stay away.
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I’ve spent a few days thinking about the Tesla Roadster reveal and landed somewhere I haven’t seen much discussion. I’m neither a Tesla fanboy nor a Tesla hater. And I couldn’t care less whether what we saw technically qualifies as a flying car. Three takeaways: (1) The risk of that live demonstration going horribly wrong was real. Almost no CEO would willingly expose their company to that kind of public humiliation for a product with so little financial upside. Elon did. (2) That willingness to attempt the seemingly impossible is what makes Tesla special. It’s also arguably Elon’s greatest contribution to America. He’s helped bring back something we’ve lost. The American spirit of chasing big scary ideas that most people think are impossible. That mindset is spreading across a new generation of founders and its long term impact on America’s future could dwarf anything Tesla ever sells. I think this is deeply underappreciated. (3) Can we just acknowledge how insanely cool that moment was? We’ve reached a strange place culturally where even extraordinary feats of human ingenuity immediately become arguments about why they don’t count. Not everything needs to be a debate. Sometimes we should just be able to stand back together and marvel at what humans are capable of. I’ve been both bullish and critical of Tesla’s ambitions over the years. But watching Elon and his team push the boundaries of what’s possible reminds me why I’m glad we have him. Whether the Roadster ever makes Tesla a dollar or impacts $TSLA stock price is almost beside the point. We need more people willing to risk failure in pursuit of things the rest of us think are impossible. Because when they succeed we all win.
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Replying to @AgustinLebron3
Speaking off LLms, I was watching your lecture 3 yesterday and came up with this little game with claude claude.ai/artifact/95HpDTNjk… btw lectures are good thanks, very intuitive explanation so far.
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When I create factors or features, time stands still and it feels like I am dreaming. I love doing it. With my best ideas, I couldn't put into words immediately why I got the result, it feels like it just expressed itself without me.
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Lovely Companies in the last few weeks...
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Cavemen Issues Dire Warning That The Wheel Is Going To Eliminate Countless Jobs
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It's official. I have been outed by OpenAI to be a Cyber Criminal. I appealed and lost. No further appeals will be considered. My crime? A 90-year old bachelor passed away. My father-in-law (the bachelor's closest friend) is responsible for his few possessions. He asked if his 5 year old iPad could be wiped of personal information and updated. I needed help from ChatGPT to reformat the glitchy device. Then I discovered it was activation locked. I asked ChatGPT to walk me through the process of removing it. It showed me the options - none of which could work. ▫️ The man is estranged from his family, he didn't save a receipt from 5 years ago, and he died without a will. I asked for any other way to remove the lock. An hour or two later an e-mail came in and said I was guilty of Cyber Abuse. To be fair, I only got a warning. But I am one innocent question away from a lifetime ban. I feel there is a gap in the system. If someone reviewed my account they would see quant research, a creative fiction book I am writing and a couple random posts trying to get an old iPad working. Not exactly the workings of a criminal mastermind. Any advice on how to get a human in the OpenAI Trust & Safety department to review this matter would be most appreciated. @OpenAIDevs @romainhuet
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For EU-Quants looking to build a verifiable track record: iMaps Capital offers a structural moat that few can compete against. While not free, setting up an ETI here costs 50–90% less than a US ETF listing. It’s the most efficient path to market for EU investors. Interested in setting one up? Get in touch: imaps-capital.com/get-in-tou… They are super friendly and will support your idea!
First pitch to iMaps Capital is out! The AI Factor Research GmbH has officially started the process to launch an ETI — a listed, actively managed exchange-traded instrument — on our AI Factor Strategy Book (long only), built via @P123Finance. Early stage. Nothing signed yet. But today we start! imaps-capital.com/ @iMapsCapital
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Operating income acceleration. Blue = top 5% Orange = bottom 5%
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Which stocks have driven most of the index’s performance from September through today? Here are the results for the 10 largest companies in the S&P 500 through today. To put it simply: if your portfolio didn’t include any of these stocks, you most likely underperformed during this period. What do you think about this?
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Discretionary investors make fun of "quants". Acting as though their days are over. Then they continue to outsource their research process to an LLM. Lol. They fail to understand that automating your due diligence process via factor investing is a way better alternative.
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I just did a studio podcast and had dinner with with @ethanrkho. He's an impressive fellow, far more than I realized before meeting him in person. Ethan's podcast has **by far** the highest signal to noise ratio of any hedge fund podcast today.
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You can’t compete with people having more fun than you
It’s October 6, which means there are only 79 days until Christmas. So here’s our full interview with Rick Dungey, executive director of the National Christmas Tree Association: 1:50 - How the Christmas tree industry works 3:45 - The economics of growing a crop that takes 6-8 years to yield 7:15 - How a Christmas tree gets selected for the White House 10:25 - When should you actually buy your Christmas tree? 12:20 - How to keep your tree alive 13:45 - The fight against tariffs and imported fake trees from China 15:40 - Trees for Troops
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Ran it in EU & Canada. 21%+ CAGR 1999 - now. Exact same 7 factors. 14% YTD.
Today, I ran it 1999 onwards. 36% CAGR 1999 - now, with just 7 factors. E-book YTD: 19%.
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The Europe micro to mid model at P123 is a real banger. Nice complimentary perk for members.
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