Strategies for Micro cap

  1. Differentiate between a breakout stock or a broken stock. Breakout stock are low-priced, undervalued and have specific catalysts in the near future that put them on the threshold of breaking out to much higher prices.
  2. Cat 1: Fallen Blue Chips (e.g. S&P with less than $10)
    • Analyze whether the company can turn around
  3. Cat 2: Undiscovered Growth Stocks
    • Often companies in not a limelight industry
    • Steady growers of at least 15 percent for past 5 years
    • Decent insider ownership of 10 percent or more
    • Or explosive growers with earnings growth of at least 100 percent
    • Low debt to equity
  4. Cat 3: low Price to Book value
    • Take into account only sellable assets
    • Low debt
  5. Cat 4: Under the radar biotech
    • check out fda.gov
    • Steal ideas from top managers
    • Find out more from medical professionals
  6. Cat 5: Invest Globally
  7. Look for what Wall street missed. Reach the 10Q and 10K. Use qualitative research to have an edge
  8. Do proper portfolio sizing
  9. Cut loss and let winners run and take profit along the way if fundamentals can’t sustain
  10. Beware of high spreads
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