But seriously, why small cap stocks?
“Small Cap Stocks Is Where The Real Money Is Made & It's Perfectly Tailored For Small Cash Traders...”
Traders, Investors & Market Watchers:
"If you're going to have a bounceback you'll get a lot of beta with small caps. You get a lot of action with them." - Philip Silverman, portfolio manager at Kingsview Management.
So what's the deal with all the... Dare I say... "hype" about small cap stocks?
Now I don't mean to alarm the Internet skeptics with the word "hype," which has a major negative taint to it, (just ask anyone who bought No Man's Sky.)
In no way am I hyping anything when I say: the gains in small cap stocks puts to shame any other grouping of stocks in the market today.
But I'm getting ahead of myself... What are small cap stocks? What makes them so much better? & why do the big guys often ignore them?
Market capitalization is just a company's market value of its outstanding shares. The definition of small cap is generally a company with a market capitalization of between $300 million and $2 billion dollars.
Small cap companies tend to be the "big dreamers" of the stock market world...
They are usually not long-established companies, unlike Pfizer or Wells Fargo, but they have something going for them that could make them (and their investors) very wealthy and most importantly, for low investment cost because their share price tends to be below $5.00 and can easily be as low as a few cents.
Whether a small cap has news of an agreement between the Chinese Government to do business with the Glorious People's Republic, a next gen anti-virus drug getting approved by the FDA, or even a game changing patent owned product that's finally going into production; these big dreamer companies (and their investors) will usually be rewarded by the news of such a big thing to happen to such a small company.
Let this sink in guys: Small Caps is where the money is being made and large caps is where the money has already been made.
20%, 50% even 100% gains can often be made in just a couple of days when good news comes out for these types of companies. There are two primary reasons why these gains happen: 1. The news suggests that the company is making the right moves in becoming a viable large cap-like business and 2: The mere fact that news is out and available on hundreds of news sites brings thousands of fresh investors seeking an undervalued company to add to their portfolio.
The news is one thing but, if that company looks good on paper, then we're looking at something truly special. - The jump in share price could quickly snowball into short sellers being forced to cover, leading into more gains that catch the eyes of even more investors looking at the market's the top gainer boards.
Now, we've all seen monster gainers only to watch them come crashing back down. The key differentiator here is that the company actually looks truly appealing to investors as a possibly viable longterm play.
OK. I know I just threw a couple a big percentage numbers at you so let's look at a couple of examples from past alerts that we've sent.
CVSI was truly a "pick your champion" stock alert and by that I mean the Medical Marijuana sector was going crazy before the elections (we alerted our members on several that had double and triple digit gains.) While most people were focused on the bitter and vicious Presidential election, savvy investors were focused on 9 states that were voting on legalizing marijuana (three of them for recreational use!!!)
CVSI happened to be one of the best MJ small caps out there and was being bought like crazy. And not to toot my own horn but our timing on this one was nearly flawless. We sent the pick out when it was trading at just $0.28 cents. It hit 52 week highs of $0.99 for a gain of 253% in about a month's worth of trading.
Still don't believe in small caps? - then check out this longterm winner:
Oh my, does CETX have so much going for it! The company has great leadership, an awesome business model and they are literally saving the environment with their business and the news has been so much in this company's favor for most of 2016.
We alerted this one back on May 16th when it was trading at just $2.14. It hit highs of $6.59 in mid August for a gain of 207% and today is still trading with gains of well over 100% since our alert.
Now... Do you think that you can buy a stock that's essentially going up in a straight line and take some profit from it? - I'm willing to wager that you can.
If small caps are so great, then why don't big investors trade them?
There's 2 key reasons why big investors don't play the small cap game and they are:
1) They have more money than us... A lot more... This let's them play the small percentage gains game:
Talking with big time investors, hedge fund managers and brokers makes me want to rip my hair out. The idea of opening a trading account with less than $100,000 (let alone the $3,000 that I started out with) is completely foreign to them. Usually, these guys trade in quantities of over $1 million dollars. This financial power highly influences the way they trade. - With that kind of cash, a million dollar investment into Coca-Cola (KO), which has a dividend yield of 3.37%, automatically gets $33,700 per year just for owning the stock. Awesome deal right? Not if you don't have $1 million bucks lying around... - Let's do the same math except instead of investing $1 million, you invest $1,000 (or 1/3rd of my total initial portfolio). 3.37% of $1,000 is....... just $33.7 dollars per year! - Smh, the rich just get richer...
2) They don't know how/don't teach how to screen for small caps
Separating out the Warren Buffetts... From their indoctrination into the business of investing, they've been taught a particular way to locate quality stocks and that way automatically cancels out most, if not all, small caps. (Oh well, their loss!)
I remember talking to one of my big broker buds over the phone about a pharma play that I was eyeing back in 2014. He couldn't get his head around the fact that the company had no revenue and had spent $5 million in R&D last year.
But, that's the essence of a small cap biotech... They spend money to make a drug worth selling and that process costs tons of money. He compared it to Pfizer, which has revenue AND develops new healthcare products, stating that PFE was the way better buy.
He later wrote it off as "dumb luck" when the stock tripled in share price after their drug candidate was approved for phase 3 FDA testing. But how could it be "dumb luck" if it was happening predicatbly?
They don't see these winners simply because they aren't looking for them. In their defense, why would you waste your life looking for these diamonds in the rough when you could just put all your millions into high dividend stocks and cash in year after year?
NOTE: Both reasons have nothing to do with stock volatility. It primarily has to do with financial ignorance. - Never having to invest with such tiny sums of money has made it nearly impossible for them to understand the small caps.
This ignorance has led to a plethora of issues for the less endowed investor because most of the marketing advice comes from big investors, for big investors. - This has led to even more issues like the defamation of small caps because big investors (the one's running the media engine) cannot believe that anyone could ever make money investing in small caps. So they write it all off as some kind of a "scam" and even warn new investors to avoid the very kind of stocks that they NEED to be watching. We cover all of this here: smallcaptrading.com/why-experts-are-lying-to-you/.
The Honest Truth:
Ok, let's get real for a second. All this sounds good but with high gain potential comes high loss potential... Right? Do we NEVER have losers? Isn't that the game? Speculation much?
Haha, yes. The Internet is just too smart to fall for this small-cap scam. *rolling my eyes* Of course we have some losers. Every trader has losers. You can even see from our newsletter archive that we often point them out to our members and even apologize. What you will also see is that most make gains in the positive direction. CETX and CVSI are but 2 of many, many winners...
And yes. If you were to jump into this river without a paddle (like I did) you're looking at the very real possibility of getting slammed against some rocks.
But that's where me and my team comes in!
As you can see from the above examples, we know what we are doing.
We've done the dirty work of sifting through thousands of small cap stocks on the Nasdaq, NYSE, TSX and OTC - looking for only the best ones. And, after we completed our list, we narrowed them down to just a few that are actually worth trading.
This list is what we call our Watch List.
However, the stocks on the list are useless if the timing is not right...
These stocks need to be closely monitored for any signs of near term big gain potential that could lead to a breakout. And, when things look ripe for the pickins, we immediately alert our members to it with a full report on the company and why we believe that now is the time to act.
Do you want our vetted watch list approved stocks sent directly to your inbox and, of course, always for free? - Does this sound like something that you might benefit from?
It might be worth a looksie:
I mean, at the very least, have a chuckle my old school
Either way, thanks for reading.
1) Small cap stocks? Don’t you mean penny stocks?
Not usually, Mr. skeptic. – Small cap stocks are usually not penny stocks. Small cap stocks are just stocks with a relatively small market cap (between $300mil and $1bil) where as penny stocks usually only trade on the OTC with a much lower share price. About half of the stocks that we focus on are traded on the big boy markets (Nasdaq and NYSE) and another large chunk of OTCs that we follow are actually traded on other reputable exchanges, like the TSX (Toronto Stock Exchange) but also have an OTC ticker so Americans can buy shares of their company as well.
2) What sectors should I focus on?
Oh boy, that varies month to month… Since the elections, we’ve been focusing on biotechs, which have gotten a massive boost from the surprise Trump victory. However, it wasn’t too long ago that we were seeing massive returns from Medical Marijuana stocks And before that, it was Gold and precious metals. This is why we suggest subscribing to our newsletter so you'll know which sector is hot.
3) Do I need a traditional stockbroker to trade these stocks?
Absolutely not! – Just sign up for an online account over at Optionshouse.com by clicking on this awesome deal here: Trade Free For 60 Days When you Open a New IRA Account with OptionsHouse! and trade them over there.
4) Do you trade the stocks that you send to us over email?
Absolutely not! – That would be insider trading and if anyone were despicable enough to do that, then the SEC would rightfully investigate him or her faster than you could say Bugatti Chiron. Our newsletter is simply a free stock market news and information service.
5) I didn’t read any of this — can you sum up what you said?
Sure: make great trades and you can’t lose.