What are Small Caps in the stock market?
They are simply the small companies listed on the share market by size, or market cap. There are over 2,000 companies listed on the ASX and most of them are Small Cap companies.
Tell me the difference between small, mid and large cap shares
The ASX is one of the most concentrated markets in the world, with the top 10 large cap stocks (BHP, Telstra and the banks) representing 50% of the overall market!
1 The All Ordinaries index and large caps
This index contains the top 500 large cap companies and accounts for 90% of the Australian equity market. These large cap stocks have multi-billion dollar valuations, and are financial giants. They get most of the media's attention and dominate the news.
2 The ASX mid-cap stocks
These company's market value is generally between $2 and $10 billion. Mid cap stocks tend to have made considerable progress in establishing successful business models that give investors stability but they are probably not growth prospects.
3 The S&P/ASX Small Ordinaries Index
This index is used as a benchmark for Small Cap ASX equity portfolios run by professional investors. Companies in this index are still very big and include Fisher & Paykel, Seven Group, and Breville with a market value still in the billions.
The stocks in the index have a market cap in the billions. These are all large cap companies in reality.
Larger companies may sometimes mean less risk, but every investor also needs growth shares in their portfolio.
You want a number of outstanding shares to really shoot the lights out and to bank big returns. Examples of Under the Radar Report's recommendations that have done this include: Afterpay, Splitit, Mermaid Marine, and Northern Star Resources to name a few and it’s this size where individual investors can really make money. Your personal wealth grows as the small company grows. There are outstanding shares to buy in this niche ASX space which is why investors follow our advice on Small Cap companies.
Read more about our top performing shares and how we did it.
Should I invest in ASX Small Caps?
Owning smaller stocks will increase your portfolio's performance.
Small Caps typically are part of any successful ASX Share Portfolio. They can provide some of the best investments because of their high growth potential. Many of the large cap stocks by market cap were once small. Investing in these niche stocks now exposes you to much greater leverage then investing in giants later.
In 1998 Amazon.com was around $7 while Tesla had that valuation just over 10 years ago but they are now true large caps.
Small ASX Stocks 101
When people talk about a small cap stock that they invested in, they are normally talking about companies with a market cap of between $50-$600 million.
Because of the smaller size of the majority of ASX companies there is very limited independent analyst coverage. These small cap companies are largely ignored by investors. This is where we come in to sift and discover stocks with great growth potential. Find out about our best performing stocks.
Invest in powerful ASX Small Caps with Australia's #1 independent stock report
1 in 5 of our Stocks have been Taken Over. Get instant access to our current Small Cap BUY, SELL and HOLD recommendations
It may seem surprising but you, as an individual investor, have an advantage over the professionals in the niches of the ASX. Fund managers are often mandated to stick to the large Blue Chips, leaving Small Caps the one area of the market that our subscribers have an advantage over the big fund managers.
The Small Caps on the ASX are just too small for the big fund managers to put their funds into.
Fund managers won't buy into any company until it reaches around $100m with the majority not even considering investing until it reaches a market cap of $500m.
Why does this matter to you?
This means that the share price of these Small Caps has had to have doubled, tripled and quadrupled before a fund manager will invest capital in it, with mum and dad investors riding the company's shares outstanding success wave to get there.
And this is precisely what happens. These are just a few of our outstanding shares that were all Under the Radar Report stocks when no-one else was covering them or investing in them.
AVA Risk Group (AVA)
Macquarie Telecom (MAQ)
Northern Star (NST)
After a period of fast growth, fund managers become interested in them when the market cap reaches a key tipping point. By which time, the share price has boomed and then the company's share price often booms again as more fund managers buy in to the future performance.
Take control of your investing
If you want to start investing in shares now check out our best blue chip stocks to buy now
Small Companies, Big Opportunities
Investing in smaller companies can be very rewarding. As a small businesses grows, so does your wealth.
The Small Caps Under the Radar Report covers and advocates buying are often not covered anywhere else.
Under the Radar Report adopts a proprietary investment process in order to look for Small Caps that match our criteria. In addition to analysing company announcements and financials, we spend a great deal of time speaking to the management of the company.
"If you want an edge in your portfolio, Small Caps will provide you with real growth."
Stocks like the banks, Telstra and some internet companies are trading at record high levels. Investors are confident that their earnings will appreciate, delivering growing dividend income. These companies have high “price risk”. If there is any softening of their earnings growth, their share prices are extremely vulnerable to big falls.
In contrast, what you see with Small Caps, is “information risk”. In these companies their historic earnings performance can often bear little resemblance to their future earnings. And so you need good research before you invest in them.
Under the Radar Report selects the best ASX small cap stocks to invest in
Our annualised average return over all our 100+ small cap share tips is over 50 per cent and this includes stocks like Sirtex Medical and Select Harvests that have tripled in value.
7/10 of our stocks outperform
We don't get every stock right which is why it's so important to diversify.
Small Companies rarely attract independent analysis because they are too small. But the shares we have covered in the last 10 years have definitely been noticed now and have delivered big returns for our subscribers.
1 in 5 of our stocks have been taken over by bigger companies
These have doubled, tripled and more in value. Some that no one knew about are now household names. Think Afterpay or Northern Star Resources. Most recently our lithium stocks are taking off.
But then there are all the small caps, that aren't taken over but just succeed in their niche and become household names, or are success stories of their industries.
You simply can't achieve the kinds of gains that you can get in ASX Small Caps that you can through other investments.
At Under the Radar Report we advise structuring your share portfolio clearly and that up to 25% of your portfolio should be invested across 7-15 Small Cap stocks to diversify your portfolio and position it for growth.
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