#EXCITING MICRO CAP STOCKS PROFESSIONAL#

Does it give you a stomach ache? Then micro-cap investing probably isnРІР‚в„ўt for you.Р”В«ut if you can stomach the volatility, buy another micro-cap and continually build out your micro-cap portfolio slowly over time. Pay attention to how the elevated volatility makes you feel. Your initial position will likely be more volatile than the overall market. Micro-Cap Portfolio AllocationР”В®veryoneРІР‚в„ўs situation is different, but I think most investors would be wise to invest at least of portion of their equity allocation in micro-caps, given the higher return potential.Р”Р„ good way to start investing in micro-caps is to buy a small position in a single micro-cap stock and see how you like it. You wonРІР‚в„ўt find opportunities like this in the large-cap world.Р”Р„lright, now letРІР‚в„ўs discuss a framework for thinking about micro-cap portfolio allocation. ZedgeРІР‚в„ўs price is truly dislocated from its fundamentals. Yet the stock is trading at a P/E of 9.9x. Insiders own a significant stake in the business. The business is growing like crazy (+30% in the most recent quarter) and generated gobs of cash. (ZDGE), a recent recommendation in my Cabot Micro-Cap Insider advisory. In micro-cap land, itРІР‚в„ўs a different story. Usually, you have to choose between buying slow-growth, boring companies that are trading at cheap multiples and fast-growing, expensive companies.Р”Р„s a value investor, you canРІР‚в„ўt own exciting companies like Tesla (TSLA) because they trade at sky-high P/E multiples. These criteria seem mutually exclusive, right? When evaluating micro-caps, IРІР‚в„ўm looking for companies with 1) substantial growth, 2) conservative balance sheets, and 3) inexpensive valuations. Just pick up the phone and give them a call! How I Invest in Micro-Cap Stocks If you want to talk to AppleРІР‚в„ўs CEO, Tim Cook, good luck getting him on the phone.Р”В«ut most micro-cap management teams are eager to spend time on the phone with prospective investors. Micro-caps typically only have one line of business, and so they are easy to understand and analyze. Famous investors Warren Buffett, Peter Lynch, and Joel Greenblatt all started as micro-cap investors but eventually were forced to seek bigger opportunities. Even better, the best micro-cap investors eventually attract so much capital that they are forced to move on to bigger stocks.

#EXCITING MICRO CAP STOCKS PROFESSIONAL#

Like any good fisherman knows, you want to go to where the fish are.Р”В«ut beyond excellent historical returns, there are several other reasons you should invest in micro-cap stocks.Р”Р„lmost all professional investors are prohibited from investing in micro-caps because they are too small. How big is this company in which youРІР‚в„ўve taken an interest? Specific products aside, big companies donРІР‚в„ўt have big stock moves.РІР‚Сњ Peter Lynch, famed Fidelity portfolio manager, once wrote, РІР‚СљThe size of a company has a great deal to do with what you can expect to get out of the stock. generated a 17.5% compound annual return, versus 9.2% for the largest decile of stocks. It starts with performance РІР‚вЂњ actually, outperformance to be more specific.Р”Р‡rom 1927 to 2016, the smallest decile of stocks in the U.S. It wonРІР‚в„ўt come as a surprise to you that my favorite niche is micro-caps.

However, I can share how I think about a micro-cap allocation.Р”В«ut before I do, letРІР‚в„ўs take a step back and cover the case for micro-caps. Therefore, I canРІР‚в„ўt provide an overarching recommendation that would work for everyone. After all, everyoneРІР‚в„ўs personal financial situation and risk tolerance is different. ItРІР‚в„ўs a very personal question and one that I canРІР‚в„ўt answer definitively. The most common question that I get is the following: РІР‚СљHow much of my portfolio should be allocated to micro-cap stocks?РІР‚Сњ

Exciting micro cap stocks