By Tom Shaughnessy of SecretCaps.com
With analysts trading shares at half a millionth of a second and corporate news breaking on Twitter before the company’s event have a chance to press release their news, its becoming clear that trading and news related opportunities in the market are all but drying up. With nearly $3.4 trillion in assets, Vanguard’s passive low cost strategy to match the market has garnered significant attention over the past few years as investors question why they are paying active managers not to beat the market.
“Clients yanked $207.3 billion in 2015 from U.S.-based mutual funds that hand pick their positions while pouring $413.8 billion into funds that mimic broad indexes for a fraction of the cost, according to new data from research firm Morningstar Inc.” - Source
MicroCap companies get labeled as garbage penny stocks, with lackadaisically tuned investors screaming “if their idea was viable the stock would be higher” and “shares are at a few cents, the company must be trash”. There are simple responses to these, in the latter for example, the person screaming doesn't understand that a low share price equates to more shares outstanding at a given market capitalization, so outside of liquidity your ownership per a nominal investment is the same.
The simple point I wish to make is that financials are automated into screeners for analysts with alerts systems, traders are being placed faster than ever, every company has 6,000 analysts with 12,000 opinions and investors need an untapped area to invest their money.
I welcome the hatred of MicroCap stocks, its gives me an insane opportunity to make money. MicroCaps are not heavily traded, watched, investigated or shared on mainstream media - until they are. Investors have the ability to find great managers, executing on great stories before Wall St and Mainstream media finds them.
I’ll give you an excellent example to spark your interest. Last week was the chilling “Brexit” event which shook global markets. Not one of my MicroCaps was even remotely affected. This occurs because Wall St can’t sell what they don’t own!
MicroCaps are too small for mainstream funds to invest in or to make money in, so we see the opportunity persisting into the future. Further, it takes considerable time to research MicroCaps and their management teams which we believe many analysts are simply unwilling to do. This latter point demonstrates that the stories within
This is not to deter investors. Once a MicroCap team execute and the story goes mainstream, investors can begin to pile into the story hand over fist.
I’ll be the first to tell you that 99% of MicroCaps (penny stocks) out there aren’t even worth looking at, but we turn over every stone to make sure they’re isn't a story lurking. I’ll be the first to tell you that MicroCap investing involves a multi-month or year timeline most say they can stomach, but the majority can not.
The point is, we are hoping the majority doesn’t catch on. We want the inefficiency of MicroCap markets to continue in part to offer these substantial opportunities. Even illiquidity maximizes gains when you get the story right, and investors rush to buy the company.
I won’t offer any companies here, since there is no way to explain a MicroCap in a sentence or even 140 characters or less. For a clear example of my point, take a look at Memex or our recent post on BeWhere Holdings.
This is a simple introduction to the opportunity in MicroCaps. For all of our educational articles, visit our education center to become a better investor.
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