A Stock Picker’s Dream Scenario

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Well, well. The ASX 200 hit a four-month high yesterday.

That’s certainly a change compared to the days before Christmas. Things were looking wobbly, to say the least.

Back on 18 December, you may recall that I said a stock bounceback was due. The conclusion: Buy the dip!

We could put a lot of the credit for this on the US Fed. It’s toned down the projected rate hikes — the correct move. 

That’s not to say the world is without worries. There are always worries.

But it’s good news for you and I. We can get on with the business of finding great stocks to buy without worrying about the Fed choking the market…

It’s fair to say the rally in Australia has also come off the surging iron ore price and relief over the royal commission.

That’s boosted the big players on the ASX.

But I’m always hunting the smaller, more explosive end of the market.

Right now, I’m making the final touches to a report on the best five plays I’ve found for the next six months…and beyond.  

It’s astonishing to me how much opportunity is out there right now.

You just have to take it while it’s there…

Do you need a confidence boost?

I read one of the most inspiring investment stories I can recall this morning.

It’s about Dr. Herbie Wertheim. Don’t know the name?

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I’d never heard of him either. He’s a self-made billionaire…and a prodigious stock picker.

Here’s how he did it…

The man with multiple ‘100 baggers’

Dr. Herbie took his business cashflow and began buying stocks as a much younger man (he’s 79 now).

He bought Apple and Microsoft in their initial public offerings. The good doctor has held on the entire time. The growth in these is astonishing. Talk about compounding!

Dr. Herbie certainly has the courage of his convictions. Don’t forget Apple nearly went broke about 25 years ago.

He makes a point of accumulating positions in companies with a lot of intellectual capital and patents.

That gives him the confidence to ride out periods when the market, or the company, hits a rough patch.

His expertise here (thanks to his personal business) gives him an edge over other analysts that only look at the financial accounts. Dr. Herbie also backs strong management teams.

But think of all the commentary, Fed moves, booms, busts and changes over his lifetime. What a great example of how you can do very well regardless.

How’s this for a ride? Dr. Herbie put money into a penny share at 33 cents after a friend of his assumed control of the company.

He still owns it now — at US$80 a share. He turned US$5 million into more than US$800 million.

Naturally, he takes losses as well. But in general, he likes to buy more of his stocks when they sell off.

When he’s done his homework, he knows that it’s an opportunity to accumulate.

That’s what I’m saying right now about the five stocks in my upcoming report.

The best sector to double your money

After all, the original thesis is the same for all of them. The only difference is that recent events knocked them down.

It’s the volatility that can make small-cap investing such a tricky dynamic to navigate.

But small caps can really move when things start firing. Two of the stocks I have for you are already creeping up again…

A reader wrote to me this week, explaining why he likes small-cap stocks.

This is what he wrote…

Hi Callum, Love reading your insights into the small cap market. Small caps are the area I like the most mainly because if you can get the right ones the profit margin is good compared to the bigger companies, you can double your money very quickly with the correct plays, and when you do take your profits.’

Indeed. 2019 is almost certainly going to be better for the small-cap sector because 2018 was so dire.

It’s not that companies ran into trouble…I Investors simply stayed on the sidelines.

Many small caps are not profitable, so they can’t fall back on regular earnings when the market goes into ‘risk off’ mode like last year.

But it’s when the market is prepared to back growth that small caps really shine.

That’s what makes this time exciting. A lot of the growth trends and catalysts that presented over 2018 are still there…but the premium in the stocks to access it is not.

I’ve said it before: The upside is much larger than the downside. Stay tuned to find out why later this week.  

Cheers,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

PS: WATCH PART TWO OF MY ‘SPECIAL SITUATION’ VIDEO SERIES TODAY!

I believe I’ve found the five most enticing small-cap prospects on the market right now. They are all outstanding companies. All looking to break out in their respective industries. And all equally smashed by the market correction last year.

That means they are now on sale for a 30-53% DISCOUNT from their 12-month highs…AND THE MARKET IS STARTING TO MOVE AGAIN…

In advance of the release of my brand-new stock research on Friday, I’ve recorded a short, three-part video series to bring you up to speed…and to prime you for what’s to come. I’ll send you a note later today when the second video is live.

If you missed the first video, go HERE.

How to find 2019's biggest stock market winners

Small-cap stocks are the most exciting stocks on the ASX. But they’re also the riskiest. In this free guide our small-stock expert, Callum Newman, reveals seven things he believes every investor should know before risking any money. Plus, get a free subscription to Australia’s newest, most forward-looking daily investment email, Profit Watch. Enter your email address below and click ‘Send Me My FREE Report’.

We will collect and handle your personal information in accordance with our Privacy Policy. You can cancel your subscription at any time. Read our FAQ