This Small-Cap Went From 9 Cents to 49 in a Month

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Mein Gott. Will the NASDAQ ever stop rising? Up it went again last night.

Not fair I say. Why do we get stuck with the boring ASX 200? It meanders about, doing nothing.

Unless…

You realise that the top 50–100 stocks in Australia aren’t always where the real action is.

No…it’s often down below in the small-cap sector.

This is where you get many of the moves worth hunting.

Today I’ll relate a recent missed opportunity for me…but why I’m not that fazed.

The phone rang the other week.

Good Lord, I thought to myself, it’s my old colleague Glenn. We hadn’t spoken in years.

What was he up to? His usual self. Thoughts on the market. Potential trades.

Glenn is a former futures broker. He told me to check out a stock called BrainChip Holdings Ltd [ASX: BRN].

I knew of Brainchip. It’s in artificial intelligence with some technology I don’t even pretend to understand. I looked briefly into it back in 2017.

All I could see was tech beyond my comprehension and the fact it seemed to swallow huge amounts of cash.

I passed at the time.

This time around I didn’t ‘pass’ on BrainChip. I never got to looking into it and catching up with the story.

Opportunities in the small-cap sector…

Look at the chart of what it’s done recently…


Profit Watch

Source: Optuma

[Click to open in a new window]

Good call, Glenn! I hope he got on it.

Why am I showing you this? Because these are the kinds of moves that you can get in the small-cap sector.

And OK — I didn’t get this one. But you can’t get them all.

There’s nothing to say I would have taken the trade even if I did look into the stock. Maybe something might have put me off.

I don’t worry about ‘missed’ opportunities like this. Every day the market throws up ideas and potential trades.

I have a particular one on right now that I’m very confident about. I told my subscribers so on Friday. It’s risen 20% in the last two days.

Could it pull a BrainChip-style run?

We’re going to find out.

One thing that’s very nice is when you enter a position and it moves up in short order. I like having some profit buffer to work with.

It’s better for your psychology.

It also means, depending on your style of course, you can put a stop-loss at your entry price. If the stock turns south you can get out at no loss.

And if it runs — beauty!

Take a look at that chart again.

Doesn’t that make you want to jump out of bed and hunt down the next one?

If that answer is no, I have no idea why you’re reading this!

If the answer is yes…

I’m very happy with my current buy list. I see a lot of potential.

There are bound to be one or two that don’t work, and one or two that end up neutral. But there are some potential high flyers here too.

I was on an office call this morning. My publisher observed that the world is currently in a crazy paradox.

The economy is in the dumps but the stock market is going bananas. As stated above, the NASDAQ is roaring in the US.

Here in Australia the index isn’t flying but some stocks like BrainChip are.

There never was a clear line between the ‘economy’ and the stock market.

The economy is an abstract notion. The market marches to its own drum.

BrainChip is a perfect example. It’s not a profitable business. But investors and speculators don’t care about that today. They’re looking at tomorrow’s potential.

Or they were. I suspect BrainChip is probably overbought now and likely to retreat.

I can’t say for certain because I don’t know enough about it…but that’s the usual way in small-cap land.

You have to time your entry and exits. There’s no ‘set and forget’ here!

I think this is important. The average investor who simply buys a passive index fund is unlikely to achieve much this year.

There’s too much pressure on the banks, for starters. For me…it’s the small-cap sector. Of course, this sector comes with additional volatility risks, which must be managed.

And if the market tanks?

You can pull your money to the side anytime you like. There’s no reward for longevity or support in all this.

There’s no time like the present to start building your wealth.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

PS: I’ll keep you posted if Glenn gives me another call. 😊

PPS: Profit Watch is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.