This Week's Small Cap Stock Advice

Richard Hemming
The earnings impacts and economic consequences that might be expected from the virus are still very much up in the air. As time goes on there will be an increasing divergence between winners and losers. It’s very much a stock picker’s environment because those impacts will vary business by business.
 
There are a myriad of issues that Under the Radar Report anticipate will affect the medium-term – six months to two years – and will have a big impact on both stock market sentiment, as well as those all-important company earnings.
 
One of the key issues that stock markets will have to face up to is where the money’s coming from and the impact that will have on asset prices. Under the Radar Report will be talking more about these huge issues in the future.
 

Advice to Small Cap investors

Under the Radar Report's advice to Small Cap investors is to make sure you have raised cash after the recent stock market recovery to ensure as a Small Cap investor you can invest as new opportunities in Small Cap stock to buy arise. Which they will. Under the Radar Report will update subscribes with new opportunities in Small Cap stock to buy in each week's stock reports. 
 

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Small Cap stock to buy this week

Under the Radar Report are covering a Small Cap stocks to buy this week that have more than performed through the crisis. One of these Small Cap stock to buy is a long time favourite cash flow machine. This Small Cap stock to buy is one of four big holdings in Under the Radar Report's Small Caps Portfolio, which you can access for free by signing up to a 14-day free trial. This Small Cap stock to buy was as an accidental tourist that Under the Radar Report covered as the crisis unfolded and it is up 25%.

Small Cap investors ask: Why does the earnings impact matter, if it’s only a temporary phenomenon?

Because profits support investment, both in capital and marketing and other necessary levers of growth. And, from a selfish perspective, as a Small Cap investor, because earnings cover dividends: if a ASX listed company is not making earnings, it is unlikely to pay dividends. In the long term, that would be unsustainable.
 

Small Caps to buy to give you growth 

At the big end of town, dividend payout ratios have been high, which is why they have been raising capital and cutting dividends. In contrast, many ASX listed small companies have to invest in their own growth because other sources of capital are not readily available. If their business has remained positive through the crisis, they may be able to sustain dividends, even through the upcoming final FY20 results. Small Caps also benefit from the compounding effect that re-investing earnings has on their growth. This is a big reason to buy Small Caps for your portfolio. Put simply, you cannot generate this level of growth anywhere else.
 

This week's stock report

Next week, Under the Radar Report are combing the vaults for Small Cap stocks to buy which our analyst team think can pay a dividend this calendar year.  To corrupt a phrase, in a land of low to no interest rates, the 1% dividend paying growth stock is El Presidente.
 

About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

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