Small Caps: The Fastest Way to Make Money

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I’ve got a small favour to ask of you today. I’ll get to that below. For the moment, let’s bask in that nice feeling you get when you’re making money.

The ASX 200 is up 17% on a total return basis so far this year. That’s the strongest year-to-date rise since 1991, according to The Australian[1].

You can thank two factors. One is the resurgent banking sector. 2018 killed sentiment here because of the banking royal commission. The Liberals retaining government is now turning this around.

The other factor for the market is the ongoing strength in the price of iron ore. It’s currently trading at US$108 a tonne. That’s even higher than it was last week.

Certainly, BHP, Rio Tinto and Fortescue are sizzling right now.

Iron ore is also a perfect example of how a commodity can run against a weak economic backdrop…and how the market can confound our expectations (stay tuned for more on this as the year goes on).

Hopefully, Profit Watch helped you nab some of this lift in the ASX.

If you’ve been with me all year, you’ll know I released a report calling for the ASX to rise, based off the big banks and big miners finally moving up together at the same time.

Banks and miners are 40% of the ASX 200, so what happens here matters.

Few people were calling the market up like that at the start of 2019. But plenty of analysts are now jumping on the bandwagon.

However, it’s probably time for you and I to adjust our sails slightly…

Two opportunities to double
your money…in one quarter!

The big stocks are likely to keep trending higher, based off the falling cash rate and improved sentiment, if nothing else. But I think the big move in the Aussie index has happened for the year now.

To me, that means digging around the smaller end of the market to try and smash the standard return.

There’s a lot more opportunity here this year than last, I can assure you of that. 2018 was a tough year.

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I’ll throw two examples at you.

Take a look at the rise of a company called iSignthis Limited [ASX:ISX]. It’s up 214% since 1 March.

Can’t the stock market be fun?

Source: Optuma

I didn’t catch this move.

But I mention it because hedge fund manager Phil King referred to it as one of his favourite ideas earlier in the year.

I never had time to research the story. I was following up other ideas (you can’t catch them all!).

Señor King also mentioned another stock in that same article I read at the time.

It jumped out at me because I’d already recommended this stock to my subscribers.

I won’t say the name here because we haven’t sold it yet. It’s taken off recently, too…

Source: Optuma

It’s up 138% since 22 February. I think it could go a lot higher.

What links these two ideas? They’re both small-cap stocks.

You should be following this sector of the market…

This is where the best gains are possible

Here’s why…and it’s pretty obvious: Where else can you potentially double your money this fast?

Small caps are your best shot at making money rapidly. You just need to find the right mix of ingredients coming together at the right time. The two aforementioned stocks are perfect examples of this.

These types of stocks are important for us Aussie investors.

We don’t have the awesome, big, US tech companies like Facebook and Google. Our blue chips aren’t growing at anywhere near the same rate as these guys. They’re slow burners now.

So in order to make fast gains, you have to look at smaller companies with a bigger runway in front of them…and fast-growing revenues.

A major risk is that these companies are usually not generating cash. They’re spending it.

But the market will go along with that if they can deliver on their growth strategy.

Smalls caps are almost the total focus for me here in Australia.

This is where I hunt for the big gains. You only need to get a couple of great rides per year, like the two above, and you’re a very happy camper.

There is one caveat to hunting big small-cap gains. The strategy works best when the market is running hot rather than cold.

Recall the 17% return figure I told you for the year so far.

That makes now the time to be cashing in. I suggest you go here to get started.

Cheers,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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