Your stock should display the following according to the website HERE.
- Out of favor or even hated (Strong investor bias against the firm)
- Hidden progress (Performance time lag)
- New Technology (Maybe something simple yet effective, ex integrated cab billing systems)
- Investment in R&D (Takes years to fruition)
- Industry tailwinds to support the firm (Goes against #1 and 9) - I do not really agree with this
- Changes to industry structure or number of competitors
- Owner managers (Eat what they make)
- Insider buying (Note the amount, volume as well as is it for executive compensation or simply increasing shareholder value?)
- Unrecognized by the market (Analysts do not cover it, no one sees it, often the small ones)
- Financial Strength
3 comments:
query on 9.
actually, if no one sees the stock, there will be no catalyst to drive bull runs either..and usually the smaller stocks are affected by a lack of liquidity, hence making it difficult to unwind..
sometimes, small is good..but too small is also no good?
Hi there,
Thats a good question posted .
It is true that small counters are generally less liquid.
Institutions mostly follow large counters for efficiency reasons. Few follow smaller counters due to that and lack of information and that gives rise to pricing inefficiency and that is why there is more room for returns for smaller guys who are willing to do an enormous amount of research.
On catalysts, the financial systems operates in a manner as described in Chaos and Swarm theory. It is a result of a myriad of agents, factors and expectations but not necessarily random. Investors seek profits and most time driven by expectations, so we seek the shortest path but may not necessarily hit our end point all the time.
A small counter that has value will show up in time for example (Intrinsic catalysts) unlocking of shareholder value and tremendous profit growth potential etc. Alternatively there may also be external catalysts such as acquisitions, spin offs etc.
For Asia counters, dividends is one of the important catalysts that we look at given the "saving" culture that is imbued in us.
If you know you bought a good business at a good price, short term fluctuations or stagnation of prices should not pose too much of a problem.
The key to big stock gains is a decent stock with a very low price to sales ratio.
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