Ian Wyatt, chief investment strategist for smallcapinvestor.com, sees bountiful gains ahead for small-cap stocks.
In an interview with Moneynews.com, Wyatt noted that small-cap stocks led the market down from its 2007 highs.
“But if you look at the returns since the March lows, small caps have actually been leading the market higher,” he points. Wyatt is also the author of a new book, The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks.
Small-caps have generated the highest returns during that period.
“We think that, long-term, small-caps are a great place to be,” Wyatt said. “I’m not a market timer, but I think there are always great opportunities with small-cap stocks.”
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Discerning investors can find “wonderful companies that are unknown and overlooked by other investors,” he says.
To be sure, finding the next big winner isn’t an easy task, Wyatt readily admits. “But what I hope to do … is to provide investors with the tools and strategies for how to find the good small-cap companies.”
Of course, “a lot of these small cap companies are unknown and deserve to be unknown and won’t go anywhere,” he says.
“But there are a select few that actually are real companies that are doing really well, performing, financially profitable, growing their revenue and are going to deliver great returns to shareholders.”
As for sectors, Wyatt is bullish on technology.
“Technology stocks have been a strong sector in the market, and a lot of small-cap companies are innovative, sort of the cutting edge of technology.”
Another industry Wyatt favors for small-caps is natural gas, and when it comes to a country, he likes China.
In his own portfolio, small-cap stock holdings account for 10 to 20 percent of Wyatt’s total.
“Individual investors should make that decision based on their own risk profile and years to retirement,” he says.
“But I really think that for any investor, small-cap stocks have to be on the table.”
And why is that? “These are the companies that are going to be the growth drivers,” Wyatt says. “They’re going to really have the potential to accelerate growth and profits in their portfolio. To avoid these by deeming them too volatile I think is really a mistake.”
In terms of specific stocks, one that impresses Wyatt is AgFeed Industries (FEED), a Chinese company which develops and makes seeds for hogs.
One positive factor for Origin Agritech is that China represents the world’s largest pork-consuming company.
In addition, “the company is expanding rapidly and adding factory capacity and production. Profit margins will increase over time,” says Wyatt.
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