Equity investors have a common dream; investing in small-capitalization (small-cap) companies that eventually double or even triple their market capitalization as their share price grows by leaps and bounds. If one invests in such companies during their early days, a modest investment could balloon into a substantial sum. The beauty of small-cap companies is their size, which allows them to grow at a rate that is almost impossible for larger companies to replicate. Say, the construction firm's shares were around $0.70 at the start of the year. At the end of September, they were trading at slightly over $2. The growth of this particular small-cap company shows that there is substantial profit to be made by investors who acquire fundamentally sound companies at the right price. There are also opportunities to find small caps trading at a discount. Smaller companies don't always conduct investor's relations activities (to distribute information on its financial performance and activities to potential shareholders) and this makes it hard for analysts to get to know their business. Larger, well-known companies receive much more coverage, so their shares are likely to trade at a fair value. This means that astute investors can make profits once their 'hidden gems' are discovered by the market, especially if institutional investors invest in them. The volume of shares bought can push prices up by 20% to 30% in a single day. However, generally, investing in small-cap stocks face risks too. There are two major types of risk faced by small-cap companies, which are fundamental and market. Fundamental risk is the possibility that earnings might fail to meet expectations, perhaps due to inexperienced or poor management. Insufficient financial resources, problems with business processes or competitive companies vying for the same customers are other situations that contribute to a small cap's fundamental risk. Before investing, you need to decide if the company can overcome its hurdles and this can be difficult to do if analysts don't cover it. Moreover, the sheer number of companies in the small-cap universe makes it harder for investors to find hidden gems. The market risk faced by listed small-cap companies is lack of liquidity. There's a stigma attached to these shares because of the low trading volume. Big funds only dabble in these companies because it can be very hard to exit if you're holding a lot of its shares. However, because the turnover is low, these shares aren't as volatile as some may expect. In the search for 'hidden gems', investors can turn to consultants who offer their research and investment advice on small-cap companies like Paradigm Capital Management. As one can be overwhelmed by the sheer volume of small-cap companies, start with companies in industries that you're familiar with. In periods of uncertainty, most investors prefer to hold blue-chip shares as they offer capital protection. However, small-cap companies can still play a role in your portfolio, depending on your risk appetite. An investor who can tolerate the risks of small-cap investing and has about 20 years before retirement can invest up to 15% of his portfolio in such companies. The challenge is in finding good companies. For more information consult with Paradigm Capital Management We are focused on a single minded purpose: To ensure that our clients have the best information on which to base intelligent financial decisions in pursuit of superior investment performance. For more details, visit here: http://www.paradigmcapital.com/
0 Comments
What are penny stocks? Are you looking for it too? If you are, you should be aware that the penny stocks lists are very difficult to find. This is usually the mistake committed by stock traders because most of them are looking for lists of penny stocks that can be readily purchased or sold but they are not aware that these lists can’t be accessed easily.
It is vital that you learn how to identify these stocks once you see them. This is the only way to make profits in the future. If you want to invest in penny stocks, you should know how to make investments wisely. By doing so, you can definitely earn lots of money. To be successful in penny stocks trading, you should be able to build your very own list. This may take time especially for starters. New traders should be equipped with the right knowledge so that they can successfully trade penny stocks. You should have the capacity to screen different kinds of stocks and identify the ones where you can make lots of money. You see, with just a small increase in the stock’s value, you can easily double or even triple your trade investments. If you do find a penny stock’s list online, you should still conduct thorough research to determine who created the list or simply the source of such list. You need to double check to ensure that the list provides only the best penny stocks in the market. For better search results, you have to find good software in stock trading so that it will be much easier to look for the penny stocks list. You will definitely spend a lot of time researching if you don’t have stock trading software to help you with your searches. When you find a useful list of penny stocks, try to look into the companies mentioned and see if they are reputable. Finding a stocks trading software may also take time. There are lots of stocks trading software sold in the market today. It’s quite easy to find out which ones are the best. Check out customer testimonials and reviews because there you will surely find useful info as to the top stock trading software today. Once you find out about the top software used by expert traders, you need to check each of the thoroughly to determine the one that will work best for you. Make sure that you choose the software that can meet all your trading needs. With the trading software in your hands, it will be a lot easier to look for penny stocks. You can obtain all the lists you need in order to make profit. Now, you have a choice and that is to purchase the best trading software available today. Once you have it, you will have the power to look for useful penny stocks list that you can use if you want to make an investment. Stock trading is growing every year. More and more individuals are now finding it as a worthy investment. If you have money, then stocks trading may be the best option for you. For those people who have internet connections at home, you can now start investing in penny stocks. There are many sources of information online; make use of them and use them as a guide in choosing the best penny stocks. For more info consult with the experts at Paradigm Capital Management Paradigm Capital Management has a long history of small-cap investing, and employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact. We are focused on a single minded purpose: To ensure that our clients have the best information on which to base intelligent financial decisions in pursuit of superior investment performance. Also read: Savvy Investors Deal better with The Risks of Penny Stocks |
CONTACTParadigm Capital Management Archives
September 2018
Categories |