Hunting Small-Caps at Their First Commercial Wave

Set the running scoreboard aside and what is left in Strategic Wave Trading is a process. Stephen Tobin hunts companies trying to disrupt established industries — vehicle autonomy, clean energy, new materials, recycling — and runs each through the same funnel before it earns a position: how large is the market and on what timeline, what do the competitive dynamics and the game theory look like, and do the company’s own fundamentals hold up.

The step most disruption stories skip is the one he puts in the middle — the incumbent. A small company with a clear technical lead is still exposed to the reaction of the large players it is trying to unseat: a price cut, an in-house build, an acquisition that quietly closes the window. Pricing that counter-move into the screen, rather than assuming the disruptor wins by default, is what turns a story into something repeatable.

The core idea The discipline built into the screen is the incumbent’s response: every disruptor he backs will, at some point, meet the established player cutting price, building the capability in-house, or simply acquiring the threat — so that counter-move belongs in the model from the start.

That caveat is the tell. Plenty of small-cap theses model only the upside path; pricing the incumbent’s reaction into the same funnel is the difference between a screen you can run again next month and a story you happened to fall in love with.

Why it’s worth your time

If you spend time in the build-out’s physical corners — the power, the new materials, the bottlenecks — this is a useful counterpart: a disciplined, repeatable way to look at the small companies trying to break in at the edges, with the incumbent’s response kept honestly in frame. We read it for the method, not the scoreboard.