by Sean Keyes
Posted 4th November 2016
Agora Financial UK hired me a year and a half ago to do a job: publish exciting investment ideas which will help readers grow their money.
So in May of that year I sat down with my publishers, Darren Hughes and Glenn Fisher, and laid out the plan.
First up: launch Risk and Reward. Risk and Reward is like my notebook. It’s meant to give readers a window into what I’m working on and researching day by day.
Step two: launch The Penny Share Letter. I launched it in August of 2015, with the goal of harnessing small cap returns for my readers.
The most exciting investment opportunities are to be found in penny shares. That’s where the growth is. So focusing my flagship newsletter on that part of the market was a no-brainer.
You’ve probably already heard me explain the reason why penny shares perform so well on average. It comes down the fact that big pension funds and institutions, which manage all the money in the markets, can’t invest in them. There’s no practical way to invest a billion pounds in penny shares. So the pension funds don’t bother trying. We have the market to ourselves. As the stock market historian David Schwartz put it, “small caps are a playground for private investors.”
Since I launched The Penny Share Letter though, a thought has been nagging me. Just like pension funds which can’t buy companies below a certain size, there comes a point where a company gets too small for me to recommend in the The Penny Share Letter.
Don’t get me wrong, I’d love to cover these companies. But there’s a practical problem stopping me: if thousands of subscribers tried to buy these tiny companies at once, it would distort the market. The share price would shoot up. And subscribers would lose out.
It’s The Penny Share Letter’s blind spot.
So now it’s time for the third step of my plan: last week I launched a small, exclusive investment service focused on the smallest stocks in the market.
It’s called Microcap Millionaires, andI’m going to reveal it to Risk and Reward next week.
I’ve had to limit the initial intake to 200 spots, and 150 have already been taken up by Penny Share Letter subscribers. I’ve had to limit the intake because, as I said, companies this small are extremely sensitive. Share prices can zoom up and down based on a bit of news, or wave of new buyers. 200 is the largest number of subscribers I could take on without distorting the companies’ share prices.
And by the way – in case you’re wondering “what’s so great about microcaps, anyway?” Here’s some evidence for you. It comes from a book called The Triumph of the Optimists, which breaks down the long term trends in stock market investing.
The book shows the smaller a company is, the bigger its returns will tend to be.
From 1955 to 2000, a £1 investment in big companies turned into £592. Over the same time period a £1 investment in small companies – the type I recommend to my readers in The Penny Share Letter – returned nearly three times as much, £1677.
And a £1 investment in microcaps over the same time period returned £5691. That’s nearly ten times the returns from investing in large companies. And it’s not just about picking winners – this number refers to an index of hundreds of microcap stocks.
This isn’t just a once-off result either. It’s been found in markets all over the world, at various times.
It comes back to my job at Agora Financial UK: publish exciting investment ideas which will help readers grow their money.
They don’t come more exciting than this. Keep an eye on your inbox next week to get one of the last few slots.
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by Max Munroe
Posted March 14, 2013
by Ben Traynor
Posted February 21, 2017