By: Costas Bocelli — July 11, 2019
How to Bag Big Gains by Going Small
The major stock market averages are off to their best start in years.
Take the S&P 500, the large-cap index…
…it’s up +17.7% through the first six months of 2019.
That’s the best start to a calendar year since 1997!
Most of the heavy lifting has come from the “big boys”.
Just look at the year-to-date returns from a few of the world's largest publicly traded companies:
- Facebook (FB) +44%
- Apple (AAPL) +37%
- Microsoft (MSFT) +35%
- Amazon.com (AMZN) +28%
Combined, these four stocks have a market capitalization of $3.47 trillion dollars and account for roughly 15% of the entire weighting of the S&P 500.
For sure, the performance of these four stocks has been impressive and profoundly influenced the returns generated by the S&P 500.
But what if I told you that there are opportunities to generate even greater returns?
I mean, far greater than the 17% return in the S&P 500…
Even greater than the returns generated by these four large-cap stocks.
Sounds too good to be true, doesn’t it? But it’s actually happening right now unbeknownst to most investors. The only difference is “size”.
All You Need to Do is "Look Small”
I’m not talking about penny stocks or shady securities trading in the over-the-counter pink sheets. I’m talking about publicly traded companies with a market capitalization of between $300 million and $2 billion.
In the small-cap universe, there are huge opportunities for individual investors to generate massive returns. One of the biggest benefits of investing in small-caps is the potential for more growth than large-cap companies.
And if you get into the right ones, it’s not uncommon to generate triple or even quadruple returns.
Small-caps have a track record of delivering “ten baggers” or profit returns of 1,000% or more.
Every month in Sector Focus, our premium investment newsletter, we highlight a sector ripe with high quality investment ideas. It’s called The Featured Sector of the Month and it’s distributed in a video format and delivered to our subscriber’s inbox.
And in this month’s feature, we shined the light on the Biomedics Genetics sector or more commonly referred to as the “biotechs”.
With so much advancement and innovation in healthcare, there are many compelling companies in search of the next big blockbuster drug or therapeutic remedy.
The group is actually quite broad these days.
In fact, at True Market Insiders, we track more than 500 companies that belong to the biotech sector.
(Click any image to enlarge)
It’s actually 507 companies to be exact.
Now if you quickly scan some of the returns of the past six-months, you’ll notice many have generated triple-digit returns.
And here’s the thing…
Many of these companies are small-caps and fly completely under the radar of most investors simply because of their size. Like I said, it’s not uncommon to see massive gains generated by companies that have a market capitalization under $2 billion dollars.
While it’s true there is the potential for large gains, small-cap investing is not immune to risk either and typically carry more volatility than large-cap investing.
But just because they may be considered riskier doesn’t mean that you have to take on more risk. Investors should still maintain a disciplined approach and properly size each position.
In the recent issue, we sifted through the sector and shared 16 ways to play the group – two exchange traded funds and fourteen individual stocks.
Of these, eight happened to be small-caps, companies with a market cap of $2 billion or less.
While it wouldn't be fair to our paid Sector Focus subscribers to reveal all the recommendations, I’m going to share one of them with you today so you can see the massive profit potential that can be had investing in small-cap companies.
I'm willing to wager you've never heard of this company nor did you know that it’s listed on the Nasdaq Composite just like Facebook (FB).
I referring to Arqule Inc. (ARQL).
Arqule is a biopharmaceutical company that is engaged in the research and development of therapeutics to treat cancers and rare diseases.
It also happens to be a small-cap.
At the start of this year, ARQL was trading $2.50 per share and had market-capitalization of under $300 million dollars.
Just recently, the stock was trading around $12.00 per share and had a market-capitalization of more than $1.2 billion. That’s an increase of 380% in about six-months!
ARQL is just one example of the massive gains that can be generated by investing in small-caps.
And you can find them everywhere -- not just in the biotechs sector. There many other segments of the market that have small-caps with massive growth potential -- Chemicals... Healthcare...
These tiny gems are everywhere.
And again, don’t let the size fool you, because our very own Editor-in-Chief Bill Spencer has begun revealing the best small-cap stocks that are hitting his radar.
If you’re not familiar with small-caps investing and want to learn more or simply want this high quality investment idea in the different well-stocked sectors, then watch your inbox for this weekend’s issue of Small-Cap Saturday.
Although "Big Bill" made me promise not to spill the beans, he did share all his research on his latest small-cap investment opportunity. And I’ll have to say, the stock is setting up in a real good spot with massive upside potential.
So be sure to check your inbox for the latest issue of Small-Cap Saturday.
Until next time,
P.S. To learn more about Sector Focus, our premium investment newsletter and gain immediate access to this month’s Featured Sector of the Month including all 16 biotech investment recommendations, gives us a call: 855-822-0269.