Large caps, a waste of time?

[Trembling Hand]

Just ran some queries on my ASX database. As follows

Broke companies up by market CAP into 4 quarters Largest to Smallest that traded on 01/08/06 and compared their returns to 31/03/08.

As expected the smaller the Market CAP the higher the average return. Also broke up each Quarter into the top 30% of performers and bottom 30%. Interesting the median and the bottom not much between Market Cap sectors.

The big winners are in the top 30% of performers in the smallest market Cap sector with 309 % average gain. BUT this doesn't include stocks that have stopped trading and a quick look at the missing ones tells me about 100 have gone missing most from the smallest CAP.

 

[MRC & Co]

BUT this doesn't include stocks that have stopped trading and a quick look at the missing ones tells me about 100 have gone missing most from the smallest CAP.

lol, which leaves us full-circle, back to the beginning. R/R.

Interesting stats though, thx.

 

[tech/a]

Th has confirmed what most traders subconsciously believe,and thats that quick $s can be made on small caps with small capital bases.

Its a common lure and pretty human in my view.

I find the pennies a great challenge.
As I trade R/R in discretionary trading more so than a possible % return figure on investment,the pennies offer outstanding return on risk in extremely short timeframes.
The challenge is to become set for these exponential moves early enough and to understand the herd mentality and exit them upon exhaustion.
Because of this potentially massive return on risk-----% winners and string of losses if controlled by very low risks and very tight stops offers substantial returns.
Your equity curve will be less than smooth.

But as TH points out you are likely if you play the pennies widely enough to have a few total capital losses on singular investments.

But as Wayne also states
You can enjoy excellent R/R with leveraged products on the larger caps and smoother equity curves and better sleep patterns.

As has been suggested an adventure into both areas would seem the most logical.

 

[wayneL]

Here's a 10 bagger move in 3 trading days on a Large Cap stock.....err, sorta.

Who said elephants can't dance? ... well, their shadows can.

Disclaimer: Risk risk risk, you can lose your shirt, get warts on your nose, blah blah blah.

 

[Trembling Hand]

Good point Wayne. Leverage comes with the big caps. You can't get that with the Penney dreadfuls.

 

[grantk]

Good point Wayne. Leverage comes with the big caps. You can't get that with the Penney dreadfuls.

Unless your broker is Opes Prime! Opps, maybe not a great idea....:bricks1:

 

[wayneL]

Unless your broker is Opes Prime! Opps, maybe not a great idea....:bricks1:

What does Opes Prime have to do with options? That's what TH and I were talking about.

 

[wayneL]

Here's a 10 bagger move in 3 trading days on a Large Cap stock.....err, sorta.

Who said elephants can't dance? ... well, their shadows can.

Just by way of an update, from a low of 20c just a few days ago, this option has seen a high of $5.40 today with the last trade at $4.50

I just wish I was here to brag about the 10,000 contracts I bought at 20c. :

 

[Rainmaker2000]

I'm obviously a massive fan of small caps........but small cap or micro cap does not have to mean risky businesses trying out a business model like a mining company or biotech..........

I just prefer small caps mostly with solid, established businesses cause they are often neglected, they have room to grow and they are likely to be acquired by big caps.....

My biggest holding for a while has been Telstra instalments, hardly a small cap, pretty bloody boring really....except that by 2011 it should be round a 3 bagger....