$1M Masterclass: How to Use AI to Research Small-Cap Stocks Like the World’s Best Investors
Fluenteers, welcome back! And a special salute to the Fluent Few, our inner circle of long-term compounders and partners. 👋🏻
The next Buffett won’t read 10-Ks all day, he’ll train an AI army to do it while he thinks.
I’ll provide you with the golden nuggets to ensure that AI (ChatGPT, Claude, Perplexity, etc) become a gold mine for your investment process.
And remember…
These prompts are building blocks. Don’t use them in isolation, stack these prompts.
This way, your AI agent will be irreplaceable.
Happy compounding!
I. THE NEW ERA OF INVESTING: HUMAN JUDGMENT × MACHINE INTELLIGENCE
Small-cap investing has always been about asymmetry: small pools of data, massive potential returns.
AI shatters the bottleneck, you can now process every filing, call, and trend in the small-cap universe with near-instant comprehension.
But the real power isn’t in automation, it’s in augmentation:
AI doesn’t make decisions; it compresses chaos into clarity, so you can make superior ones.
The Goal of This Masterclass
By the end, you’ll know how to:
Source ideas others miss.
Research faster with deeper accuracy.
Synthesize insights like a veteran fund.
Automate your pipeline for continuous alpha.
Refine your judgment using AI as a mirror.
II. FOUNDATIONAL BLUEPRINT — BUILD YOUR AI RESEARCH SYSTEM
Step 1: Set Up Your Tech Stack
Core Brain: GPT-5, Claude, or similar reasoning AI.
Data Feed: Financial APIs (e.g., Alpha Vantage, Koyfin, SeekingAlpha filings).
Knowledge Layer: Your notes in Notion or Obsidian.
Execution Layer: Excel or Google Sheets + AI plugin for live valuation updates.
💡 Tip
Think of your system as a multi-disciplinary analyst team:
AI = research assistant
You = portfolio manager
Data = the battlefield
Prompt Template
You are my senior equity analyst with 40+ years of experience in the field of small-cap investing, niche in high-quality small-caps. Your goal is to help me identify and understand high-quality small-cap businesses. Base all insights on verifiable facts and logic. Provide concise, data-driven reasoning.
III. DISCOVERY — FINDING UNDER-THE-RADAR OPPORTUNITIES
The best small-cap ideas never show up on CNBC.
AI lets you map the invisible market, the companies quietly compounding cash beneath the radar.
Quantitative Filtering with AI
List 25 listed small-cap companies (< $1 B market cap) with:
Revenue growth > 10% CAGR (5 yrs)
ROIC > 12%
Debt/Equity < 0.5
Insider ownership > 8%
Rank by stability of gross margins.
Pro Move: Ask AI to also explain why each meets criteria, pattern recognition beats data lists.
Qualitative Cross-Filter
From this list, identify companies with:
Network effects or switching costs
Simple business models
Long runway in fragmented markets.
You’re now surfacing high-quality niches, not hype.
Market Structure Scan
Which industries under €2 B total market size have structural tailwinds (digitalization, regulation, demographic change) and low institutional coverage?
The secret to small-cap success: find complexity the crowd ignores.
Share this with a friend that needs a personal assistant! 👇🏻
IV. COMPANY AUTOPSY — TURN AI INTO YOUR DUE-DILIGENCE MACHINE
When you find a name worth digging into, use AI to run a full forensic breakdown.
Step 1: Understand the Engine
Explain [Company]’s business model in 4 sentences.
Map revenue streams, customer concentration, and pricing power.
Step 2: Analyze Financial DNA
Extract the last 5 years of revenue, EBITDA, FCF, ROIC, and debt levels.
Identify trends, anomalies, and capital allocation behavior.
Then:
Compare FCF generation to net income. Any red flags in cash conversion?
Step 3: Assess the Moat
Based on filings and customer data, which type of moat does [Company] have? (Cost, Network, Brand, Process, Regulatory)
Rate durability from 1–10 with justification.
Step 4: Detect Red Flags
List any accounting or governance risks from the last 3 years of filings.
Highlight auditor changes, related-party transactions, or sudden margin shifts.
Step 5: Benchmark Competitiveness
Compare [Company] with its top 3 peers across ROIC, gross margin, capital intensity, and revenue growth consistency.
You now have a private equity-grade teardown in under an hour.
V. SYNTHESIS — CONVERT DATA INTO CONVICTION
Great investors don’t drown in details — they distill them.
The “Thesis Builder” PrompT
Summarize [Company] in one page:
What they do (3 sentences)
Growth drivers
Risks
Valuation range (Base, Bull, Bear)
Why it can compound 15%+ for 5 yrs
Use only verifiable facts.
The “Asymmetric Lens” Prompt
What must go right for this to 5× in 5 years?
What must go wrong for it to fail?
Quantify each.
This builds your mental map of probability vs. payoff, real investing edge.
Send this to that one friend that needs his personal AI to assist him in evaluating companies. 👇🏻
VI. VALUATION — BUILDING RANGE, NOT ILLUSION
AI is brilliant at running assumptions, and dangerous if you let it guess.
You use it to simulate range, not certainty.
Prompt
Run a 10-year DCF with 3 scenarios:
Base: 10% growth, 12% EBIT margin, 2% terminal
Bull: 15% growth, 15% margin
Bear: 5% growth, 8% margin Show FCF, discount rate 10%, and fair-value range.
Then:
Summarize what’s priced in at today’s valuation.
That last line is gold.
Understanding expectations, not price, is what separates legends from amateurs.
VII. MANAGEMENT QUALITY — THE INTANGIBLE EDGE
AI can’t sense charisma, but it can analyze consistency.
Prompt
Analyze all earnings call transcripts since 2020 for [Company].
Summarize tone, use of forward-looking language, and mentions of execution discipline.
Identify patterns of over- or under-promising.
Then cross-compare:
Benchmark management commentary vs. actual results — quantify delivery rate.
That’s how you measure integrity and competence at scale.
VIII. INDUSTRY & MACRO INTELLIGENCE
AI’s strength: digesting entire industries overnight.
Prompt
Summarize the current state of the [industry]: total addressable market, major players, growth catalysts, regulation shifts, and where small-caps fit.
Highlight niches with low institutional coverage but rising demand.
Then layer:
Identify 3 secular trends shaping the industry and how they could expand or compress margins.
This is your context map, the lens through which you see your stock.
IX. AUTOMATION — BUILD YOUR PERSONAL RESEARCH ENGINE
Turn all this into a living system that runs 24/7.
Weekly Automation Prompt
Every Monday, scan global small-caps under $1 B with:
10% YoY revenue growth
Insider buying in last 90 days
Expanding margins. Summarize top 5 with 5-line thesis and valuation range.
Portfolio Tracker Prompt
Track my holdings. Pull latest financials quarterly and summarize key changes in revenue, margin, and guidance.
You now have an AI-powered research assistant that never sleeps.
X. META-LEVEL THINKING — USE AI TO IMPROVE YOURSELF
This is where billion-euro investors separate from millionaires.
They use AI not just to research companies — but to audit their own thinking.
Feedback Loop Prompt
Review my last 10 investment memos.
Identify recurring biases, overly optimistic assumptions, or ignored risk signals.
Summarize lessons and build a correction checklist.
That’s how you compound wisdom, not just returns.
XI. ADVANCED EDGE: STRATEGIC AI USE-CASES
1️⃣ Information Advantage
Train custom GPTs on SEC filings, investor letters, and niche industry reports.
You’ll have a private knowledge base that out-analyses 95% of funds.
2️⃣ Sentiment Analysis
Summarize sentiment from last 10 quarters of earnings calls in this sector.
Are management teams more confident or cautious over time?
3️⃣ M&A Pattern Recognition
List all acquisitions in [industry] under $500 M since 2020.
Identify valuation multiples and strategic rationale.
What patterns do top acquirers target?
4️⃣ Insider Alignment Scan
Cross-analyze insider trades and executive compensation structures for my watchlist.
Rank by skin in the game.
Each of these tasks used to take weeks — now it’s minutes.
XII. THE PLAYBOOK: YOUR DAILY / WEEKLY / MONTHLY RHYTHM
📅 Daily
Read 1 AI-summarized 10-K or transcript.
Ask AI to highlight key changes vs. last filing.
📆 Weekly
Run small-cap screen with updated data.
Review 3 new tickers and build 1 mini-thesis.
📈 Monthly
Reassess top 5 holdings.
Ask AI: “Has my investment thesis strengthened or weakened based on new data?”
Process creates precision. Precision compounds conviction.
XIII. PHILOSOPHY — AI AS THE NEW COMPETITIVE EDGE
AI doesn’t remove human intuition — it amplifies disciplined reasoning.
In small-caps, that’s lethal.
Most investors rely on stories; few master systems.
With this framework, you become:
Faster than analysts
Smarter than screeners
More consistent than funds
Share this and never forgot the AI cheat sheet down below!
XIV. THE ULTIMATE PROMPT LIBRARY (CHEAT SHEET)
Screening/Idea generation
List 20 small-cap stocks under €1B market cap with:
- 5-year revenue CAGR > 10%
- ROIC > 12%
- Debt/Equity < 0.5
- Insider ownership > 10%
Rank them by capital efficiency and stability of margins.
Filings Analysis
Analyze [Company Name]'s last 3 annual reports (10-K or equivalent):
- Summarize business model, risk factors, and management discussion.
- Highlight capital allocation decisions and margin trends.
- Identify any changes in accounting or language year over year.
You’re no longer chasing ideas — you’re building an intelligence engine.
Moat Assessment
Based on available filings and industry data:
- Identify the type of moat (cost, brand, process, network, regulatory).
- Rate moat durability 1–10 and justify with evidence.
- List specific signals that the moat is strengthening or weakening.
Valuation Framework
Build a 10-year DCF for [Company Name] with 3 scenarios:
- Base: 10% growth, 12% EBIT margin, 2% terminal
- Bull: 15% growth, 15% margin
- Bear: 5% growth, 8% margin
Discount rate = 10%
Provide fair-value range and summarize what the current price implies.
Management Evaluation
Analyze all earnings call transcripts for [Company Name] since 2020:
- Summarize tone and forward-looking language.
- Identify consistency between promises and results.
- Flag any patterns of exaggeration, defensiveness, or strategic clarity.
Red Flag Detection
From the last 3 filings:
- Highlight any related-party transactions, auditor changes, or off-balance-sheet items.
- Identify anomalies between net income and cash flow.
- List any warning signals that might suggest manipulation or governance risk.
Investment Thesis Builder
Create a 1-page investment brief for [Company Name]:
- Elevator pitch (3 sentences)
- Growth drivers
- Risks and mitigants
- Valuation summary (Base, Bull, Bear)
- Why this company could compound 15%+ annually for 5 years
Peer Comparison
Compare [Company A] vs [Company B] across:
- Growth rates, ROIC, FCF conversion
- Capital allocation strategy
- Margin trend stability
- Relative valuation (P/E, EV/EBITDA, FCF yield)
Conclude which business is structurally stronger and why.
Portfolio Tracking
Update my holdings overview:
- For each stock, pull latest financials and summarize revenue, margin, and guidance changes.
- Flag companies whose fundamentals or management tone have worsened since last quarter.
Bias & Process Audit
Review my last 10 investment memos:
- Identify recurring cognitive biases (confirmation, anchoring, narrative).
- Highlight patterns in missed risks or overconfidence.
- Create a “correction checklist” to improve my next decisions.
XV. CONCLUSION — THE QUANTUM EDGE
In the next decade, investors won’t compete on information, they’ll compete on interpretation.
AI is your leverage, but your discipline is your moat.
Use it to think deeper, move faster, and act only when conviction is justified by fact.
The real compounding starts when your mind and your machine move as one.
Thank you for reading and being part of this growing community of thoughtful, quality investors.
FluentInQuality exists to help you cut through the noise and focus on what truly compounds over time: quality, patience, and discipline.
If you enjoyed this piece, share it with someone who values long-term investing as much as you do.
Together, we grow smarter.
You can also connect with me across all platforms, where I share shorter insights, portfolio updates, and market lessons:
And remember: Great investments don’t shout. They compound quietly.
— Yorrin (FluentInQuality)
Ican do tomorrow morning around nine okay thanks maby let just little things out for you thank you