A topic that has been discussed a lot recently is micro-cap stocks, or in other words, small and medium market value stocks.
Because companies with a market value of less than 3 billion have recently experienced a significant decline.
Seeing the entire micro-cap index plummet, some people exclaim that the era of penny stocks is not far away, and the winter of small-cap stocks is coming!
At this time, should you panic and escape, never touching it again?
Or should you go against the current and enter the market to pick up the bottom.
Everyone has different answers in their hearts, but in fact, there is a standard answer to this question.
From beginning to end, the big opportunities have always been in small-cap stocks, but the big risks are not necessarily only in small-cap stocks.
Translated, it is just these four sentences.
1. Companies with a market value of tens of billions want to reach a market value of trillions, which is actually very difficult.
2. Many companies with a market value of tens of billions started from a market value of several billion.3. Companies with a market value of hundreds of billions or even trillions actually experience significant devaluation quite often.
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4. Companies with a market value of several billion are also not few in number when it comes to facing delisting and bankruptcy in the future.
Given the current market environment, small-cap stocks are definitely going through a winter, but those that can ultimately welcome spring are still small-cap stocks.
Perhaps some people will say again, this statement is as good as not saying anything.
Everyone knows that excellent listed companies have opportunities in the future, but no one can grasp such opportunities in advance.
Whether it is winter or spring for small-cap stocks, there are always seeds that can sprout, but how to choose the seeds?
First of all, we need to understand one point, that is, big opportunities only come after big disasters.
The biggest opportunities always appear after being wrongly killed.
That is to say, if it is a winter, then both good stocks and bad stocks are hard to escape.
It's just that good stocks will be reborn from the ashes, while junk stocks will plummet.Only by first understanding this major logic and finding the foundation can we find opportunities in small-cap stocks.
In my eyes, investment opportunities in small-cap stocks actually come in two types.
The first type is small and micro enterprises with a market value of 10-30 billion yuan.
After this round of small-cap stock sell-off, there will definitely be many small and micro enterprises with a market value of over 10 billion yuan.
Among them, due to the poor economic environment in the past two years, there are countless small and micro enterprises that have suffered losses.
The essence of small and micro listed companies is to achieve certain accomplishments in a certain field by leveraging the trend.
There is also a part that has once achieved brilliant achievements.
But now, the company's profitability is quite worrying.
The net profit of the vast majority of small and micro enterprises is less than 50 million yuan a year, and the proportion of those with a net profit exceeding 100 million yuan is actually very low.From the perspective of net profit, 100 million is a safety line. Small and micro enterprises with a net profit of 30 million or 50 million are always at risk of facing losses at any time. If the strategy goes wrong, they may even embark on a path of no return. The outbreak of small and micro enterprises often stems from opportunities, such as the arrival of the era's wind, or suddenly receiving a super order. In this sector, there are many stories of "ugly ducks turning into swans," and some are opportunities created by the tide of the times. Among a pile of garbage companies, it is actually quite difficult to find those that are worth investing in. Moreover, these listed companies often do not have core technology and productivity, which is the biggest disadvantage. The proportion of these treasures in the entire market will not exceed 10%. For ordinary investors, it is necessary to carefully explore, and those who do not have this ability can directly give up the investment opportunities of small and micro enterprises. In the era of the registration system, micro-plate stocks are likely to be a disaster film, and it is advised not to touch the stocks that are losing money.
The second category is small and medium-sized enterprises, with a market value of 50-100 billion, or even 100-200 billion.Such listed companies often already possess profitability or core technology.
A listed company that can still have a market value of tens of billions during the capital winter, especially when the company's performance is problematic, must have a lot of substance at its foundation.
Not every listed company can support its own market value.
The biggest characteristic of these listed companies is that they have already been spotted by some institutions and have undergone foundational research.
Even some of these companies will be included in some core indices, such as the Science and Technology Innovation 100.
Some listed companies have a unique advantage in a certain technical field.
When technology has not yet become productive force, these listed companies can only be measured by valuation, and when technology becomes productive force, they should be measured by net profit.
Therefore, whether these listed companies have great investment value mainly depends on whether the opportunity comes.
Companies that already have a certain technical accumulation, if they can take advantage of the market and take off with the east wind, it is normal for the market value to multiply by five or ten times.
Looking back at those new energy companies with a market value of tens of billions, they used to be between 5-10 billion, and have reached over 100 billion at their peak, which is a vivid example.The gold in this part will not account for more than 20% of the entire market.
For investors, it is a relatively safe way to explore these stocks through the constituent stocks of index funds such as the Science and Technology 100, Technology 100, etc.
Those who can be selected into the index all have two brushes, at least occupying the commanding heights of certain fields.
Finally, mention a concept called learning to be a fruit-picking investor.
What is fruit picking?
It is the professional institutions that explore the things from zero to one, and the investors pick the fruits from one to ten.
Investors often have a greedy heart, always hoping to copy the absolute bottom.
In fact, if a small and medium-sized listed company can take off, it is at least a tenfold increase.
But in the market where one is chosen from a hundred, it is not possible for small retail investors to dig out such a listed company.Professional investment institutions conduct in-depth market research and research on listed companies, far surpassing the capabilities of individual retail investors.
Even they cannot accurately judge the quality of a listed company, let alone ordinary retail investors.
What retail investors can grasp is merely the speculation of hot spots, which is not the logic of investment at all.
Absolute speculation on hot spots will eventually lead to a return to where they started.
To find real opportunities in small-cap stocks, one must identify listed companies that have undergone a phoenix-like rebirth.
At the end of the cold winter, seize the opportunity at a low position and layout the entire industry.
When spring comes, observe which seeds have sprouted new buds, and then it is the opportunity to layout individual stocks.
In the future, there will inevitably be a large number of bad seeds buried under the cold winter, and this is unavoidable under the registration system.
Retail investors without experience and ability in small-cap stock investment are advised to participate less in small-cap stocks, especially micro-cap stocks in the future. Although these companies will still be the protagonists of the next era, it is a wise strategy to enter and participate after they have taken shape.
Investment itself is a strategic game, and no one can make a profit from beginning to end.How to effectively utilize one's investment strategy and control the risk-reward ratio as much as possible is the key to achieving profitability.
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