Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21
Bitcoin Stock to Flow Model Forecasts Infinity and Beyond! - 14th Jul 21
Proteomics: The Next Truly Massive Investing Opportunity - 14th Jul 21
Massive Solar Storm to Hit Earth 2025, Coronal Mass Ejection (CME) Danger and Protection Solutions - 14th Jul 21
Is This The Best Way To Play The Coming Helium Boom? - 14th Jul 21
Meet SuperMania and its Ever-Present Sidekick, SuperMeltdown - 14th Jul 21
How NFTs Are Shaking Up Arts Trading - 14th Jul 21
Gold: High Time to Move Out of the Penthouse - 13th Jul 21
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days - 13th Jul 21
How Will Remote Work Impact the U.K. economy? - 13th Jul 21
Why Helium Stocks Are Set To Soar in 2021 - 13th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Investors Can Identify the Best Small-Cap Stocks

Companies / Investing 2015 Mar 02, 2015 - 11:16 AM GMT

By: Money_Morning


Sid Riggs writes: Since the October 2014 lows, the Russell 2000 (the broadest measure of the small-cap sector) has gained 18.09%.

To put it mildly, small-caps have absolutely been crushing the broader market over the last four-and-a-half months. Too bad the mainstream financial media would rather spook investors with the "what-ifs" of what is going wrong domestically and abroad.

Speaking of media coverage…

Remember back in September 2014 when the Internet and every major financial network was stumbling all over themselves to spell the end for small-caps because the Russell 2000 had just experienced the dreaded "Death Cross," a technical condition that occurs when the 50-day simple moving average crosses below the 200-day simple moving average?

I wrote an article at that time dissecting the truth behind the small-cap Death Cross.

And the verdict?

A whole bunch of hooey!

Investors who "short" the Russell 2000 during a Death Cross condition experience a dismal 25% winning percentage and an average return of a 0.97% loss.

Bottom line, the Death Cross is statistical a waste of time. It makes for good headlines – and a good way to lose money.

Another Cross Signals Profits

On the other hand, the "Golden Cross" (when the 50-day moving average crosses above the 200-day moving average) actually provides a much more valuable signal.

Investors who "go long" the Russell 2000 during a Golden Cross condition experience an impressive 78.13% winning percentage with an average return of 17.01%.

If you want to dig into those numbers a bit more here's the original article again.

Why am I running on about the Golden Cross? Because the Russell 2000 unceremoniously experienced a Golden Cross back on December 19, 2014 . You probably never heard a single peep about it from the same financial pundits who would rather spook you into reading when the Death Cross occurred.

Since then, the Russell 2000 has hit all-time highs and investors who've been invested in quality small-caps stocks are experiencing some very good returns.

Could we see a pullback (off all-time highs) in the near term?

Recommendations for Small-Caps

Sure, pullbacks are always a possibility.

Longer term, though, quality small-cap companies still represent one of the strongest wealth creation investments in the market – but not just any small-cap company.

It's important to make sure you're investing with global must-have trends that provide strong tail wind. My favorite sectors right now are biotech, cybersecurity, all-flash memory storage, artificial intelligence, and Chinese consumers – all of which either meet a critical demand for the future or are the future.

Already this year, subscribers in my Small-Cap Rocket Alert have pocketed gains of 200% on two separate occasions following two explosive biotech companies.

And things are just heating up.

Last week alone we experienced single-day gains of 27.4% and 9.4% on two non-biotech companies with disruptive technologies of their own that are re-writing how their respective industries operate.

But if investing in individual small-cap companies is something you're not comfortable with yet, here's a way to start.

You can invest in exchange-traded funds that hold several companies with exposure to key sectors. Not only will this give you exposure to key small-cap companies in the growing markets, but it will also lower the company-specific risk associated with investing in individual companies.

Some of my favorite ETFs right now are: PowerShares S&P SmallCap Hlth Cr Ptflo (Nasdaq: PSCH), PureFunds ISE Cyber Security (NYSE Arca: HACK), and Guggenheim China Technology ETF (NYSE Arca: CQQQ).

If you're new to small-cap investing, let's take a moment to talk about risk management.

If you're like me, the idea of uncovering the next Apple Inc. (Nasdaq: AAPL) is very exciting – but as compelling as a company is, it's critically important to make sure you don't bet the farm on any single company – ever!

Most professional traders limit their exposure to individual companies to 2% to 5% of their overall investable capital. Even then, they still typically run trailing stops on each stock in order to keep their overall risk at a minimum while still leaving themselves open to huge returns.

If you really want to make sure you have your risk management in order, limit your total small-cap allocation to no more than 10% over your overall investable capital.

In the 50-40-10 portfolio structure developed by Money Morning's Chief Investment Strategist, Keith Fitz-Gerald, we would refer to these riskier positions as our Rocket Riders, which are great risk-adjusted compliments to your Base Builders (50% of your holdings) and Growth and Income (40% of your holdings).

Source :

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in