Make More Money: Use the Power of Small-cap Stocks


The easiest way that you can make big money in the Aussie stock market is by investing in small-cap stocks.

It doesn’t matter if you attended a top-tier university, went to TAFE or didn’t even finish high school. You don’t need classroom education to be a great small-cap investor. You only need to be smart. There’s a big difference…

You’ve already taken the first step toward investing success by reading Money Morning. Now all you have to do is learn how to take advantage of the weapons in your arsenal to lock down huge gains in the stock market.

Before I show you how to that, I have to debunk a dangerous myth.

Big shot brokers want you to believe that there’s only one way to be a successful investor.

They’ll try to convince you that to be a successful investor, you should buy only big-name stocks and hold onto them for years.

Mark my words, absolutely nothing could be further from the truth.

If you choose to believe this rubbish, it will keep you at the bottom of the financial food chain for the rest of your life.

What the fat cats on Collins St and Martin Place really want from you is control of your money. They want you to leave it with them and forget it.

And here’s why they hope you’ll never bother to challenge the myth…

Your broker makes money whether your portfolio soars or falls. All he cares about is that you buy or sell stocks.

He takes his commission and you get stocks that could be profitable, but are more likely just the ‘hot picks’ of the week. Stocks that lead your portfolio down the drain in no time.

But as you’re about to see, you can do a lot better. You can win at the stock market when you use the power of small-cap stocks to your own profitable advantage.

For example, back on March 20th, you could have bought into a little company called NetComm Wireless Ltd [ASX:NTC] for just 47 cents per share.

This was a remarkably cheap price for such an exciting stock.

That’s why I tipped NetComm Wireless to my readers in Australian Small-Cap Investigator.

It had a terrific opportunity to benefit from the rise of machine-to-machine communication. Its share price didn’t value those rosy prospects.

After I tipped the stock, NetComm Wireless signed a distribution deal in Japan and took its story to new investors in the US.

That’s why in the two months after I tipped NetComm Wireless, the shares surged by more than 68%.

Not a bad return for two months’ investing.

If you pick the right small-caps with wealth-creating catalysts, you can reap even richer rewards.

Take, for example, the stock I tipped to my readers in April — Analytica Ltd [ASX:ALT].

This tiny firm is right on the cusp of commercialising a medical device. It could change millions of women’s lives around the world.

When I saw how close Analytica’s product was to hitting the big time, I was amazed that the stock was so cheap. When I tipped Analytica to my readers on April 15th, you could buy in for just 2.9 cents per share.

Since then, the company has rolled out its breakthrough medical device just as I forecasted.

Less than two months after I recommended that readers buy in, Analytica shares had exploded — up a massive 76%.

Again — not a bad return for two months’ investing!

It goes to show that in the small-cap sector, you can buy into some tremendous businesses. Many of them trade for virtually nothing.

And as the market cottons on to the opportunity, you reap the benefits.

Discovering the hidden potential in companies like this before anyone else can be extremely rewarding. After all, getting in before the crowd is what makes a select few investors rich.

It doesn’t take many smart small-cap plays to make a lot of money, either.

But I won’t pull any punches here: picking the big winners is hard.

Not all of our small-cap stock tips rise as far or as fast as the two I just told you about.

But this is how you have to play the small-cap market. You have to swing for the fence and let your big winners make up for the misses.

One stock that hasn’t worked as well as we hoped is Alkane Resources Ltd [ASX:ALK].

When Kris tipped Alkane in early 2013, it was gearing up a gold project towards production. But it was also developing a rare earth minerals project right here in Australia.

None of us could have forecast that China would distort the rare earths market so much over the past two years.

Nor could we accurately tell how quickly the commodities boom would cool off, or that the gold price would struggle.

Alkane’s shares have done it tough. They’re down nearly 57% since we tipped it. But it goes to show how hard it is to pick small-cap winners…particularly when you play in the junior mining sector.

Despite what you might read in the press, the mining sector is not the be-all and end-all of Australia’s economy and share market. That’s why I look for small-cap superstars of tomorrow in the tech, healthcare, consumer, media and finance industries too.

I’ve honed a simple and effective technique of targeting the most explosive companies listed on the Aussie stock market.

And when I say it’s effective, I mean it.

Our average gain on closed positions is 121%.

Our average loss on closed positions is -43%.

In other words, our average gain is close to three times the size of our average loss.

In the world of small-cap stocks, it takes a lot more than simple valuation to measure a company’s potential.

After all, many of these small companies aren’t even turning a profit…yet. The trick is to pick out the ones that will, while avoiding the ones that could poison your portfolio.

I’ve spent a long time perfecting stringent guidelines for my Australian Small-Cap Investigator readers. I expose them to the best emerging stock plays on the market today.

Keep an eye on your email this weekend. I’ll send you a special report that reveals those guidelines.

What’s more, I’ll reveal a simple strategy that shows you exactly how to lock on to shares that could double, triple or quadruple your money in a single shot.

If you follow my method, you could be booking big stock market gains sooner than you think.

Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator

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The Daily Reckoning
The Daily Reckoning offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, The Daily Reckoning delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, The Daily Reckoning is published in 7 countries with a worldwide readership of almost 1 million people.

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