How Small Caps can present a GREAT deal of Opportunity

Found this article from Investopedia... Worth a read... its quite interesting..
Sometimes, buying stock in small capitalization companies - those with market caps of between $300 million and $2 billion - is more profitable than buying shares in large caps. In fact, according to Ibbotson Associates, an investment-consulting firm that also tracks long-term market data, small caps have increased in value by an average of more than 12% per year between 1927 and 2007. Meanwhile, large caps have increased just over 10% during that same time period.
This performance advantage is no coincidence. In fact, small caps have several advantages that large caps simply can't match. Read on as we cover how small caps can produce big gains and how you can pick a winner.

Temporary Valuation Disconnect
Small caps may outperform larger companies over time, but the operative words here are "over time." That's because smaller companies, primarily because of their lack of visibility within the investment community, often experience a disconnect between their stock prices and their fundamentals. This discrepancy between price and fundamentals presents a tremendous opportunity that small cap investors can take advantage of.

Thin Market
Small caps tend to be thinly traded, and while this is a characteristic that can slice both ways, it often presents a huge opportunity for shrewd investors. As the company grows its revenues and earnings over time and the public becomes more aware of its existence and future growth prospects, demand for the stock inevitably perks up. And when a large number of investors start to clamor over a very limited amount of stock, this gives small cap stocks the potential to rise quite rapidly.

Lack of Analyst Coverage
According to First Call, on Jan. 8, 2007, UBS Securities raised its rating on IBM from "neutral" to "buy." The stock edged up $1.17 on the news, or about 1%. But that move was nothing compared to what happened on Sept. 6, 2005, when Brean Murray upgraded Wilson's Leather from "accumulate" to "strong buy." The day the report went out the shares moved up roughly 4%, and within a week they rose almost 12%!

Why the discrepancy between reactions?

It's simple. At the time of the IBM upgrade, about 25 different analysts were covering the stock. This meant that there was a great deal of information already in the public domain, and it would take a major news announcement or an unusually bullish report or group of reports to move the stock substantially. However, at the time, only about five different brokerage firms had disseminated research on Wilsons. As such, the investment community was more apt to react in a positive manner.

Institutional Sponsorship
With regard to the benefits of institutional ownership, a terrific example can be found in a small cap called Labor Ready, which changed its name to TrueBlue Inc. (NYSE:TBI) in 2007. Back in late 1997, the temporary employment provider was trading in the mid-single digits. However, its then Chief Executive Glen Welstad went on several road shows where he met with a number of institutions, which warmed to the stock almost immediately.

The result of Welstad's aggressive public relations campaign was nothing short of amazing. Within a year's time, a number of big-name funds got involved in the stock and the shares skyrocketed into the $25 range.

A small cap company's lack of institutional sponsorship can present a huge opportunity, particularly for investors who get in early.

Eric Schmidt, who headed up Novell and later moved on to Google, once said in a conference call that big companies were like aircraft carriers or cruise ships, "they take a long time to change direction."

In many ways, this is a perfect analogy. In fact, it can take years for a larger company to bring a new product to market because of the committees that need to review its practicality (before its introduction), the legal vetting it must receive and the work that goes into its marketing and promotion. Small companies, on the other hand, have less bureaucracy and a genuine need to push products to market just to survive.

Take, for example, a small-cap restaurant business that has operations dispersed throughout the United States. Over time, this type of company would be able to refurbish its locations and make menu changes many times within a period of weeks or months. However, similar changes would be impossible for a restaurant giant like McDonald's (NYSE:MCD), which had more than 30,000 restaurants in 2007 - not to mention a bulky senior management staff with a reputation for moving at glacial speed.

The ability to be nimble enables a small company to seize opportunities (enter new markets, release new products, etc.) in a much more efficient way than its large cap counterparts. This allows it to grow sales and earnings at a 20 or 30% rate, whereas most corporate behemoths tend to experience mere single-digit growth.

While larger companies can and do merge with or acquire other large companies, it doesn't happen very often. On the other hand, smaller companies always seem to have a target on their backs.

That's why, as of 2007 companies such as Isle of Capri Casinos, a casino operator in the Southeast, or Ameristar Casinos, a casino operator in the Midwest tend to do so well even during tough economic times. The ongoing possibility that they will be bought out by larger players acts as a perpetual catalyst for the stock.

It's also much easier for a large company, which probably has pretty deep pockets, to buy a small company that's already up and running than it is for the larger company to start a comparable operation from scratch.

The fact that smaller companies often have a target on their backs and that larger companies are often willing to pay a premium to acquire them makes small caps all the more attractive.

The Bottom Line
Small caps aren't necessarily a panacea for all portfolios, but they do have operational advantages that their larger cap counterparts do not. Factors such as being thinly traded or not having many analysts cover the stock may act as a double-edged sword but, for the astute investor, these factors can actually present a great deal of opportunity.

Personal Opinion
Small caps are without a doubt attractive when it can score you home run returns of 50 - 100% in a short period! Nevertheless, they come with risks as well.
The best way to play small caps is during a stock recovery phase as their % returns will exceed their blue chips counterparts easily. 
On the other hand, when it is recession time or during periods of uncertainty, REITs and blue chips which offer stable dividend yields can be your best buddy.


Reasons for DUKANG DISTILLERS Explosive Breakout 18/4/2013

At 5pm+ during work; I tuned in to the SGX website to take a glance at the stocks and one stock caught my attention right away!

Why did DUKANG DISTILLERS rise up 16%+ suddenly out of the blue?!?

I did a research immediately when i reached home... and found out the details below:

Obviously there is someone out trying to manipulate the Stock [Dukang Distillers]... I observed two important things...
  1. Numerous 1,000 shares (1 lot) being purchased throughout the early periods [no one in the right mind will keep buying 1 lot at such close periods of time as the commission just doesn't make sense]
  2. Huge volume of "ASK"/Intent to Purchase of more than $100,000 at stakes indicates interest by rich investors or financial institutions.

What does that mean? It means the "big fishes" are keeping the prices afloat @ half a bid ($0.005 more) and it will generate positive signals to big traders/retail investors out there to join in the party!


Dukang has fallen tremendously over the past years to a low of $0.20+ last year but has picked up and reached $0.35+ recently. A positive pattern [ascending triangle] is established and surpassed through to the upside. 

A short-term target price would be $0.46. However, I believe there might be a pull-back after a 16% rise in one day. An entry after some pull back can prove to be $_$.


Imminent Downturn coming? Stock Market Outlook 17/4/2013

Many people i have asked are scared of chasing the uptrend as they think that it is unsustainable... so what are the charts showing then? Without further ado, let's zoom right to the charts:

i found this on the CNBC. [http://www.cnbc.com/id/100646957] It says a scary pattern maybe coming.. A Head and Shoulders which will lead to a much potential decline.

The STI has been unable to break through the upper bollinger band and has consolidated among the bands. This pattern is similar to what is shown in the 2nd picture where the upcoming trend is Downwards.


While i still believe in the Bull Run (Uptrend) in the Long Run, it's time for a healthy correction as stocks do not go up all the way at one go! I have liquidated all my holdings and preparing my "money chest" to load up on stocks with high growth potential going forward.

On the other hand, value investors who are holding on to their stocks for the long run can dollar-cost average down (a.k.a. buying more as prices go down). 

Lastly, keep in touch with me on facebook as i will be revealing the appropriate Entry time when the time is ripe. 


How to save on income tax in Singapore

It's the season to file your income tax again (1 Mar to 18 Apr 2013)! Right now, the Government has made it even easier for us to submit the income tax with the No-filing service; means your income tax is submitted automatically!

You can seek additional help from the tips if you are unsure of certain stuff or even visit their e-learning guide.

Usually, the fields will already be pre-filled by IRAS based on the info it receives from the relevant organisations such as CPF and our companies if they are in auto-inclusion inside the program. Thus, if you have no changes in income/relief claims; you are relieved of the extra work to login to the portal & submit your tax.

However.... many people i know are ignorant about the tax reliefs they can claim to reduce their tax significantly! Right now, lets take a look on some ways you can SAVE TAX & GET RICH.

(i) Parent Relief/Grandparent Relief: Many people tend to miss out on these. and they give huge tax reliefs seen below:

  YA2009 and before From YA 2010 onwards
Type of relief
Staying with parentsNot staying with parentsStaying with parents Not staying with parents 
Parent relief$5,000$3,500$7,000$4,500
Handicapped parent relief$8,000$6,500$11,000$8,000
And its not just YOUR Parents! You can do it for your parents, grandparents, parents-in-law or grandparents-in-law! Just make sure nobody else in the family are claiming under the same parent's name :)

(ii) Life Insurance Relief: Many people do buy insurance in many forms so prevent from letting your premiums paid go to waste! There is a limit though, you cannot claim this if your CPF contributions exceed $5,000 annually... what a waste!

(iii) Course Fees Relief: If you are constantly upgrading yourself in relation to your career; you can also claim for the tax relief for this. Examples may include: ACCA, CFA, CPA etc..

(iv) SRS/CPF Top-Up: I found a very good link showing you how you can kinda allocate your cash to your SRS/CPF and use them to claim tax reliefs. The benefits are that you can earn interest on the accounts, use the funds inside to invest after a certain min. sum & lastly, claim your tax reliefs!
But do take note that your funds will be locked in for a long time so don't jump in without doing your homework!

On a side note, other types of Personal Reliefs are usually included automatically. No point in handing out tax revenue to the government when you can claim claim claim it all! All the best in filing your income tax!