Micro-cap stocks have recently become the focus of market attention.
The sharp decline that began at the end of January, along with the continuous rise and repair after the Spring Festival, has once again drawn everyone's attention to micro-cap stocks.
It seems that just after the cold winter, spring has arrived, even giving people the feeling that the scorching summer of micro-cap stocks is coming.
On one side, there are a group of value investors mocking micro-cap stocks, and on the other side, there is indeed a real money-making effect. Where should micro-cap stocks go?
To find the answer to this question, we should think about a few issues.
First, who is the culprit of the sharp decline of micro-cap stocks? Who is the one to take over?
Saying that micro-cap stocks need to catch up with the decline is definitely correct, because in the second half of 2023, they set a historical high.
But this cliff-like decline, a sharp drop of more than 30% in a week, and nearly halved in a month, is still irrational.
To put it bluntly, it is similar to the index going to off-exchange financing in 2015.
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So the culprit of this sharp decline in micro-cap stocks, needless to say, is the quantitative funds that have long relied on micro-cap stocks for speculation and arbitrage.The last few consecutive daily limit-downs are the result of forced liquidation of leveraged positions, short positions, and margin trading.
The arbitrage funds with leverage have become the real culprits of this round of plummeting.
In fact, every plunge will eventually have funds to take over, so there is no need to worry about no one taking over, because there is room for rebound, and there is profit.
Starting from the bottom of the lowest point, the strength of the short-term rebound has already exceeded 50%, which is significantly beyond the expectation of 30-40%.
Who is taking over, in fact, in the direction of the CSI 2000, there is the national team taking over, and in other directions of small and micro-cap stocks, there are funds that are clearly bottom-fishing, and they are smart bottom-fishing funds.
These funds must have a safety cushion, make money, and withdraw smoothly.
So the rebound of small and micro-cap stocks, it cannot be said that it will definitely enter the hot summer, but it is also difficult to return to the cold winter, and experiencing the ups and downs of spring is the most normal.
Second, how many small and micro-cap stocks actually have real growth potential?
People's expectations for small and micro-cap stocks mainly come from growth potential.
But to be honest, nowadays, it is very difficult to find growth potential in small and micro-cap stocks.Or, individual stocks with growth potential may not be included in the category of micro-cap stocks.
The number of professional players in this market is increasing, and the attention to small and micro enterprises is actually very high.
Small and micro enterprises with growth potential may break through a market value of 50 billion as soon as they go public, leaving the ranks of micro-cap stocks.
And those listed companies with a market value of only 10-20 billion, without core technology, will not have good growth prospects.
And some companies, even if their performance is not very good, but with real technical strength, even if they are losing money, will have a market value of tens of billions.
Therefore, the issue of growth, in the micro-cap stocks, will not account for a particularly high proportion.
Most may still be struggling on the line of life and death, wandering back and forth between profit and loss. The future direction of such listed companies must be towards the direction of penny stocks, gradually being marginalized and abandoned.
The listed companies of micro-cap stocks that can finally come out are most likely pigs on the wind, and only then do they have the opportunity for rebirth.
Third, if the micro-cap stocks are differentiated, which direction is the focus of the future?
Differentiation is an inevitable result, and the ups and downs of the entire sector cannot be a normal state.There will also be no professional institutional funds to take over the stocks of micro-cap companies, as there are too many pitfalls.
The 20-80 phenomenon may be the ultimate fate of micro-cap stocks, and it could even be a 10-90 split.
As for micro-cap stocks, which direction might be the focus of the future and whether some high-quality listed companies can emerge depends mainly on the industry track.
There are some traditional tracks where listed companies have been around for more than a decade, and it is impossible to expect such companies to undergo a transformation.
However, for some innovative tracks where listed companies are still in their infancy, once there is a major opportunity for industry development, the chances are very great.
On the other hand, the investment of the company in innovation and research and development is also crucial.
Pigs can fly in the wind, but they will fall, only birds can truly soar.
Whether the listed company itself has wings determines the future development prospects. Talent, technology, patents, marketing, and products all need to be accumulated and invested in.
If such companies focus only on capital operations and cashing out at such a small scale, they will definitely not have more opportunities.So, it's not that micro-cap stocks can't be bought, but the direction of gold mining needs to be more precise to reduce the risk of stepping on a mine.
Let's talk about the real thing, the future short-term, medium-term, and long-term trends of micro-cap stocks.
Short-term.
In the short term, sharp declines and repairs have already been experienced.
For a period in the future, probably 6-8 weeks, it is highly likely to fluctuate up and down at this position.
There will definitely be a significant sharp decline in the middle, but the cycle is very short, possibly 1-2 days.
This is like a rapidly falling ball, which falls to the ground, then rebounds, falls again, and rebounds again.
A lot of profit-taking has accumulated in a row, which needs to be digested before it can continue to move forward.
Medium-term.The mid-term trend of micro-cap stocks is actually not very optimistic.
Looking back at the past two years, the overall trend in this direction was significantly stronger than the entire market, but the performance situation was actually deteriorating.
That is to say, large-cap stocks are releasing risks, while micro-cap stocks are accumulating risks.
The current performance of micro-cap stocks is not optimistic, and the development situation is precarious. Before the economy significantly improves, this situation will continue for a long time.
No large funds will enter micro-cap stocks, relying solely on the strength of retail investors, it is ultimately no match for the tide of trends.
Long-term.
In the long run, it is destined to be differentiated, and high-quality listed companies will eventually leave the ranks of micro-cap stocks.
That is to say, micro-cap stocks will always represent those companies that are lukewarm and may have operational risks.
This means that the ultimate decline of this sector is inevitable, and the companies that emerge will leave this team.
In simple terms, micro-cap stocks will become a mining place in the future. There will definitely be big bull stocks with ten times, thirty times, or fifty times the returns, but most of what is dug out will be stinky and hard rocks.For ordinary investors, the difficulty of mining in this place is extremely high.
From a probabilistic perspective, it is difficult for ordinary investors to make money in the long run by gambling on small-cap stocks.
This is like looking for food in a garbage dump, where it is easy to find moldy and spoiled food, which can easily lead to stomach problems.
After a series of significant adjustments, it is possible to enter the market to see if there are any bargains.
Because regardless of quality, short-term fluctuations depend on whether the price has an advantage, while long-term performance depends on the quality of the listed company.
Do not completely dismiss small-cap stocks; the stock market only has expensive and cheap, not truly good and bad.
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