Posts Tagged ‘micro-cap stocks’
What Doom and Gloom? The Stock Market Is Going Up
By Mitchell Clark, B.Comm. for Profit Confidential
The stock market rally continues, and it’s great; that is of course, if you own the right companies. For the most part, the best wealth creation over the last few years has come from large-cap, dividend paying stocks that are the brand names we all know. I’d never thought I’d be singing the praises of mature, blue chip companies (and dividends), but it’s always in the tough times that large-cap companies really shine.
With the expectation of slow or stagnant economic growth in 2013 (and possibly 2014), today’s best performing stocks are likely to keep on leading. I would say, however, that no other large economy on the planet is better able to right itself after a bubble or recession like the U.S. economy. So while the expectation for economic growth isn’t robust, the stock market’s fair valuation combined with dividends can still give low double-digit returns. U.S. corporations are in excellent health, and this is part of the reason why institutional investors are buying right now.
I’ve really been focusing on large-cap companies and their dividends ever since the stock market crash in 2008/2009. When you have such a shock to the entire financial system, you don’t need to find the fastest growing micro-cap stocks—you want to own what institutional investors are buying, and that’s been dividend stocks.
Stock market returns from the 2009 March low have been excellent, and the right shoulder formation on the S&P 500 Index looks like it will soon be complete. As I’ve written before, the long-term chart on the S&P 500 is quite ominous; the peaks make you really wonder how the stock … Read More
Broader Market to Consolidate—No
More Upside Without the Fed
By Mitchell Clark, B.Comm. for Profit Confidential
A lot of smaller companies and micro-cap stocks are now reporting their quarterly earnings, and a lot of the numbers are pretty good. I’ve noticed particular financial strength in a number of micro-cap technology companies, along with good trading action among biotech companies.
There’s no real trend among micro-cap stocks, aside from the Russell 2000 Index, which is about five percent below its recent high set in March of this year. The broader stock market has held up well over the last several quarters, and the Russell has pretty much mimicked the S&P 500.
The best action for stock market investors, as far as I’m concerned, has been in large-cap, dividend paying companies. Micro-cap stocks, like biotech companies, don’t particularly trade as a group; their action is event-driven. Investment risk in the stock market today is very high, and institutional investors have been reticent to invest in micro-cap stocks. The security of dividend income is the reason why so many large-cap companies are trading right at their highs.
The price momentum in this kind of stock market is with large-caps, and it’s going to stay this way going into 2013. There are very few micro-cap stocks in this market that are providing consistent returns; off the bat; I can’t name any. Among micro-cap stocks, industry groups that stand out as the most attractive for risk-capital investors are technology, biotechnology, and mining. All of these subsectors, however, are being met with little investor participation among individuals. Trading action in today’s stock market is only about institutions, and that’s why any micro-cap stocks being considered need to have what institutions are looking … Read More
Stock Market Needs This Earnings Season to Give It Some Direction
By Mitchell Clark, B.Comm. for Profit Confidential
It continues to be uncertain times for the stock market. You get good news, the stock market goes down; you get bad news, the stock market goes up. With no definable trend, you could say we’re in a market where anything could happen. This is why investment risk is so high.
I’m hopeful about this upcoming earnings season and it’s exactly what the stock market needs—to see some results from corporations themselves. The lull between earnings season can always produce some stock market volatility because investors trade emotionally, based on news from policy makers and government statistics. The only rationality comes from corporations whose numbers are audited and whose estimates for the future are generally quite accurate. Earnings season can’t come soon enough. At the very least we’ll get some definable trend in the earnings reports off of which to trade.
Expectations for this earnings season and the rest of the year have come down quite a bit, which is why we’ll see some solid outperformance and the likelihood of an upward bounce in the stock market. There have only been a handful of earnings warnings from big, brand-name companies, but this is a good sign. There’s also a reasonable stock market valuation and a marketplace that wants to be buyers. I fully expect that dividend paying blue chip companies will continue to provide stock market leadership in the current environment. Ever since the stock market low set in March 2009, big-cap companies have been the place to be. Many have provided the kind of capital appreciation you’d expect from faster-growing micro-cap stocks.
I admit, however, that it is … Read More
Choppy Trading Action Here to Stay
—It’s an Index Trader’s Paradise
By Mitchell Clark, B.Comm. for Profit Confidential
I think investors really want to be buyers of stock at this time, but there isn’t much of a catalyst to do so. Institutional investors are buying, but they’re also playing on the market’s volatility, accentuating the results. Reality is beginning to set in now and there’s a realization that corporate earnings are actually going to be strong in the bottom half of the year. The employment situation isn’t great and neither is the real estate market, but the corporate economy is well-positioned to deliver solid earnings growth and this makes the current stock market look very reasonably priced.
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