Why Focus on Profitable U.S. Small Cap Stocks?
KeyStone’s focus on profitable, growing small caps is driven by three key factors: Historical success, the data, and the experts. All indicate small and profitable businesses are fertile grounds to uncover the next great growth stocks (or 10x Stocks).
1) Proof is in the Results:
A sample of KeyStone’s 10x plus small-cap recommendations.
These five KeyStone recommendations from KeyStone’s research have produced portfolio-changing gains for our clients. Holding just one of these stocks over the past decade in a simple 15-25 stock portfolio could have dramatically altered your wealth. Perhaps most importantly, we use these past successes to help guide our analysts to uncover the next great growth stocks.
At recommendation and before their ascent each stock held the following commonalities:
- Small (small caps).
- Profitable (net income positive).
- Unknown (limited institutional coverage).
Our past successes indicate the average investor can gain a meaningful advantage by including select profitable, growing small-caps to a simple 15-25 stock portfolio – and the data agrees.
2) The Data in Favour of Profitable Small-Caps.
A recent study by Jenga Partners of all stocks that gained 10x (or 1,000% plus) globally between 2012 and 2022 found the following commonalities:
- 87% of all global equities that went up 1,000% (10x) or more over the past ten years started as micro/small-caps.
- 82% of those were profitable at the start of their ascent.
- 91% had some history of profitability.
The data is clear and the numbers speak for themselves. Savvy investors who want to gain a significant long-term return advantage should position their portfolio with reasonable exposure to high-quality, profitable small-cap growth stocks
Investing in just two or three of these great capital-compounding 10x plus stocks in an average investor’s lifetime can be game-changing for their portfolio.
Do not miss out on this profitable, yet under-followed segment of the market.
3) The Expert(s)
During the 1999 Berkshire Hathaway Annual Meeting, Warren Buffett, perhaps the greatest investor of all time, advised focusing on smaller companies, as they are often overlooked. Successful investing, according to Buffett, requires independent thinking, and buying good businesses at attractive prices.
“If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance isselling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50 percent a year on $1 million. No, I know I could. I guarantee that.
The universe I can’t play in (small caps) has become more attractive than the universe I can play in. I have to look for elephants. It may be that the elephants (large caps) are not as attractive as the mosquitoes (small-caps). But that is the universe I must live in.”
— Warren Buffett, discussing the advantages of small-cap stocks
Here Buffet pines for the days when he could invest in quality, profitable small-cap stocks.
In this context, it is unfortunate in terms of his returns today that Warren now has too much money. Unless you have several billion in loose change, you can take advantage of profitable small-caps to try and find the next 10x stocks.
Trust us, your ability to invest in these stocks is the one and ONLY advantage you have over Buffett. Let us help you use it.
And, as Buffett recently stated, it does not take many great stocks in your lifetime to create true wealth.
“In his 58 years of Berkshire management,…(his) satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years.”
Let that sink in.
What he is saying is that only 12 great investments (stocks) in his almost hundred years on earth have made him one of the richest humans on the planet.
Each year, our analyst team reviews over 8,000 U.S. micro to small and mid-cap stocks leaving no stone unturned applying our GARP model and stringent management interview process, all to uncover 8-15 profitable, undervalued U.S. small caps, a select few with 10x potential.
Many will tell you the market is efficient.
For those who put in the work, it is not.
This is how we find the inefficiencies.
Let us help you add some of these great stocks to your portfolio. As Warren Buffett and our own past successes show you, it does not take many great small-cap stocks to make a massive difference to your wealth long-term.
