Note from Stephen McBride: Longtime RiskHedge readers know that I always look for an edge in the market—so does my colleague and good friend Chris Wood. In fact, he's found what might be the single greatest edge regular investors have in the stock market.
It's a simple strategy that involves a certain kind of stock. In the past year, Chris’ followers have cashed in for gains of 421%, 399%, and 376% using this strategy. Read on to get the breakdown from Chris himself, or click here to read his most recent presentation on the strategy.
Did you know you have an ADVANTAGE over the best investor on the planet?
That’s because there’s a special type of stock that superinvestor Warren Buffett can’t buy…
But you and I can.
I’m talking about microcaps. Only regular investors can access their potential…
But don’t just take it from me… take it from the man himself.
At Berkshire Hathaway’s 1999 shareholders meeting, Buffett said, “I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in.”
“Elephants” refers to large-cap stocks. These are stocks with a market capitalization over $10 billion.
“Mosquitoes” refers to microcaps. These tiny stocks have market caps between $50 million and $300 million.
Because of their small size, microcaps are able to grow in ways that are simply impossible for large companies.
With big stocks like Amazon and Google, the best you can really hope for is a double from here. The 10X days are long gone.
Microcaps are different. They allow you to get in close to the “ground floor” before the most explosive growth occurs.
Now, you’re probably wondering why Buffett can’t invest in these explosive little stocks…
Simply put: Buffett can’t invest in microcaps because he manages too much money!
Let me show you an example…
Berkshire Hathaway, Buffett’s holding company, is worth about $640 billion. It must invest huge sums of money to grow profits in a meaningful way.
In the fourth quarter of 2020, Buffett added four new stocks to Berkshire’s portfolio.
He invested $364 million in The E.W. Scripps Company (SSP)… $499 million in Marsh & McLennan (MMC)… $4.1 billion in Chevron (CVX)… and a whopping $8.62 billion in Verizon (VZ).
In other words, Buffett’s smallest investment ($364 million) was bigger than the largest microcaps!
But it’s not just Buffett who can’t buy microcaps…
Most of Wall Street is effectively banned from owning them.
Hedge funds and other institutional investors often can’t invest in microcaps because, like Buffett, they simply manage too much money.
But there’s more to the story…
Many funds are simply not allowed to invest in companies with a valuation below a certain threshold.
That threshold usually falls above $300 million.
So for these funds, microcaps are off limits.
And since Wall Street can’t touch these tiny companies, their friends in the financial media ignore them too.
Let me show you how to exploit this advantage.
See, microcaps aren’t just better because Wall Street can’t touch them…
They’re better because they can give you bigger, faster gains.
A famous research paper found that, since 1926, “big stocks” returned 9.4% annually, on average.
Microcaps returned 11.6%.
That might not sound like a lot. But if you know how compounding works... it makes all the difference in the world.
The same paper pointed out that if you’d invested $1,000 in “big stocks” in 1926, you’d now have $4 million. If you’d invested $1,000 in microcaps, you’d have $26 million!
And that’s just the long, slow outperformance you can expect if you close your eyes and buy a whole “index” of microcap stocks.
If you can identify the very best microcap stocks, the financial rewards can be huge, and often immediate...
For example, in my Project 5X microcap advisory, I recommended a small $200 million market cap company called Personalis (PSNL) on March 26, 2020.
Personalis invented a new way to develop next-generation cancer therapies.
The cancer drug market is worth a whopping $160 billion today… and it’s growing fast.
And Personalis, a tiny company, was disrupting it with its breakthrough patented technology.
Just eight months later, on December 1, 2020, Project 5X members walked away with a 251% gain.
Personalis wasn’t a one-off either…
Disruptive microcaps have provided Project 5X members with a 421% gain in less than 13 months, a 376% gain in less than 16 months, and a 399% gain in less than 23 months.
I’m not telling you about this to toot my own horn.
I’m telling you so you can understand the power of microcaps… the stocks that give you an edge on Wall Street.
If you missed my presentation on Monday, you can still access the transcript here. In it, I share key details on my top three microcaps to buy now.
I call them “Sleeper Stocks” because most investors are ignoring them. But that should change—soon.
Because my microcap-picking system says they’re each primed to hand out potential gains between 7X and 9X.
One is a computer company with over 100 patents for its revolutionary memory chip technology.
Another is a stock I believe will 9X after the 2022 rollout of its proprietary technology into offices around the world. It’s by far the most exciting “work from home” stock in the markets today, yet I can bet you probably haven’t heard of it.
And the third is a company that’s developed the most secure payment technology in the world—in short, it processes payments on the blockchain. In fact, it’s the only microcap doing this today.
Editor, Project 5X