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How Small Caps Can Change the Way You Eat, Sleep, and Drive - Views on News from Equitymaster

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  • Apr 11, 2018 - How Small Caps Can Change the Way You Eat, Sleep, and Drive

How Small Caps Can Change the Way You Eat, Sleep, and Drive

Apr 11, 2018

Do you believe small caps can make you serious money in the stock markets?

I'm talking the kind of money that changes lives. Changes the way you eat, sleep, drive, and practically every other aspect of your life.

If you're still thinking, let me tell you that they can.

When you invest in the small cap space, your odds of seizing multibagger stocks go way up.

There are two reasons for this.

One is small cap stocks lack liquidity.

Unlike blue chips, they are not heavily traded, which is actually good for retail investors.

You see, small caps are relatively unknown and less money chases them. Big investors can't invest significant money in them because of their low liquidity. If they do so, their buying and selling itself will move prices too much - and they won't remain an attractive proposition.

But as these small businesses grow and prove themselves, big investors and funds start paying attention. The demand for the stock goes up. Many investors bid for the limited number of shares on offer. And this drives the stock price to giddy heights.

All this means huge gains for a small, early-stage investor.

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The other reason is the high growth potential of small cap stocks.

Unlike big businesses that have already matured, small caps are at an early phase in the business cycle.

They have huge room to expand which makes the growth potential of quality small caps enormous.

Imagine two companies operating in the same industry having similarly solid fundamentals. Then, in the long-term, the company which grows faster will generate more earnings which will eventually drive up the stock price.

The key then is to identify these companies before the big investors, assess their growth potential, and figure out how much to pay for the growth.

That's how we've discovered some serious small cap gainers like...

Page Industries, that went up over 5,900% in the 9-odd years we've been serving Hidden Treasure subscribers with recommendations, or eClerx that went up 2,500%...

On an overall basis, the Hidden Treasure service has garnered 30% compound annual growth rate since its inception in February 2008.

That's beating markets almost three times over!

Sounds unrealistic, but that's how your fortune rolls.

Not all small cap stocks can turn out rewarding. Some will be value traps and some will be outright value destroyers. But the ones that do, will blow the losers out of the water and turn out to be your real wealth creators.

So, keep on the lookout for such small cap stocks and you can rake in the moolah...

Good investing,
Monish Vora

PS: Hidden treasure is Profit Hunter's best-selling service - with a track record that is enviable by any measure. You cannot consistently build serious wealth without small caps in your portfolio - so make sure you are on track with your smallcaps. Sign up for Richa Agarwal's small cap service now.

Monish Vora

Monish Vora is a keen student of the markets and shares his observations through his clear and concise commentary.


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