Michael Liu's Biotech Trading Strategy & Microcap Insights

Michael Liu's Investment Journey

• 💡 Michael Liu started with day trading in high school, then worked as an analyst at Intelligent Fanatics Capital Management (IFCM) for six years.
• 🚀 He launched Capuchin Capital in 2025, focusing on publicly traded microcaps and biotech.
• 🧠 His early experiences included activist short-selling, which taught him to seek out information not readily available from companies.

Unique Biotech Trading Strategy

• 🎯 The core strategy involves identifying "shareholder base transitions" in biotech, where price-indiscriminate sellers or buyers create volatility.
• 📈 This often occurs when a biotech drug fails, leading to healthcare institutions becoming forced sellers, or during reverse mergers where new investors enter.
• 💰 He aims to front-run incremental traders by anticipating their moves, rather than predicting fundamental developments.

Risk Management and Mindset

• ✅ Position sizing ranges from 3% for risky scenarios (e.g., small company financing) to 20% for high-conviction cash liquidation plays.
• 🧘 Michael emphasizes the importance of mental clarity in trading, avoiding influences like taxes or performance pressure.
• 💸 He typically maintains 50-90% cash and holds only 2-3 major positions, prioritizing liquidity and short holding periods.

Research and Market Insights

• 🔍 Research involves obscure sources like government databases, esoteric websites, and analyzing footnotes from activist short-seller reports.
• 📊 He uses tools like AlphaSense, OTC Markets, and LD Micro for news and press releases.
• 💡 Michael challenges conventional wisdom, suggesting that biases like confirmation bias can be beneficial for long-term holding, especially for large-scale strategies like the S&P 500.

Scale and Opportunities

• 🚀 The strategy is sub-scale, working best up to $30-50 million AUM, beyond which liquidity becomes an issue.
• 🧩 He highlights arbitrage opportunities like reverse splits and odd-lot tenders, which are profitable for small individual investors but ignored by larger players due to scale.
• ⚠️ Michael notes that advice should be tailored to the investor's scale, as strategies that work for large funds are not always applicable to smaller portfolios.