What a day on the markets!
Yesterday the ‘big end’ of the ASX — large-cap stocks — did remarkably better than Monday.
Remember how we explained that on Monday just four of the 200 best performing ASX stocks were worth over $500 million?
Well Tuesday was a significantly better day for large-caps.
At the close on Tuesday, of the 200 best performing stocks on the ASX, there were nine larger than $500 million!
Amazing! That’s more than double the number from Monday. What a turnaround…
But of course, you’re not that stupid.
Just nine large-cap stocks in the best 200 performing ASX stocks is horrendous.
Here’s a hot tip — it’s not going to change for the rest of the week. It probably won’t change for the rest of the year. In fact it’ll probably never change.
But to be fair, we’ll continue to monitor the situation every day this week. We’ll check back in and see just how the big boys of the ASX do in the best 200.
There’s a point to banging on about these top 200 performers. We’re trying to get you regularly looking at the kinds of stocks that really deliver for investors.
Don’t be fooled into thinking large-cap stocks are the arena to play in. That’s the mainstream fooling you into a false sense of security.
But you’re not foolish…we hope.
If you’re reading this then you already have a sense that towing the mainstream line doesn’t get you anywhere. And the good news is you’re right. Mainstream reporting on stocks won’t ever really uncover the kinds of stocks that could very well change your entire wealth position.
The little guys show how it’s done
Every day on the ASX it’s not the likes of Commbank [ASX:CBA], South32 [ASX:S32] or QBE Insurance [ASX:QBE] that deliver sizeable gains.
Instead its companies like Dropsuite Limited [ASX:DSE], PayGroup Ltd [ASX:PYG] and RMA Global [ASX:RMY] that punch out returns like 30.43%, 17.22% and 14.29% in a day.
Now there’s a good chance you’ve heard of Commbank, South32 and QBE. They’re household names.
But do you know what Dropsuite, PayGroup or RMA Global even do? We’re going to guess you probably don’t.
Dropsuite is a data protection company. They run a cloud-based service that allows secure backup of business data. And while Dropsuite is listed on the ASX, in reality they’re actually based in Singapore.
PayGroup is a software company. They deliver payroll and employee management software to businesses across Asia. They’ve actually had a couple of false starts at listing on the ASX, but in late May this year finally concluded their IPO and started trading.
RMA Global is involved in the Real Estate business. They run the site RateMyAgent and have developed a novel mobile game, Property Tycoon. The game allows for tipping on real property auctions that happen across the country. RMA is another ‘newbie’ to the ASX only listing in early July this year.
And that’s one of the other things about the small-cap region of the ASX. There is a constant wave of new companies listing and trading.
These are companies that have gone through an initial IPO and then commenced public trading. Sometimes they trade lower than their IPO price, sometimes higher.
But you can be assured that these new companies are the future leaders of the ASX. What we know from years of experience in the markets is that it’s small-cap stocks that have the potential to soar and become large-cap stocks.
The ones that go from obscurity to household names as their prices go from cents on the dollar to tens of dollars in a heartbeat.
Two ASX 10X stars
For instance you probably didn’t know about Bellamy’s Australia [ASX:BAL] in 2014. But to be fair not many did. They were unknown, they were a small-cap stock.
There wasn’t any mainstream media coverage. And certainly there were barely any brokers covering the stock.
After all, why would the mainstream look at a milk formula company languishing at just $1.30.
But boy was it a market darling after surging past $14 in 2015. The mainstream had Bellamy’s on the business reports almost every night. The stock was now a household name. And it carried a lofty valuation — big enough to turn it into a large-cap.
You see when a small-cap stock like Bellamy’s 10X’s — that is, it sees its stock price increase more than 10 times over — everyone wants to be a part of it.
But the ship has sailed by the time the mainstream pile in. By the time the news is reporting on it, the run is over. The real money is made early on when no one knows about it.
The same thing is happening with Afterpay Touch Group [ASX:APT]. You’ve probably heard of Afterpay Touch Group by now. They too are getting mainstream coverage.
It’s because the stock is up from around $3 this time last year, to a high of $16.19 just a few weeks ago.
But Afterpay’s story extends further back. They used to be just ‘Afterpay’. And in 2016 you could easily have picked up Afterpay stock for as little as $1.
Then in 2017 they merged with Touchcorp. Combined the two became Afterpay Touch Group. And the combined entity has surged in value. Afterpay is another great small-cap 10X star.
Again, both Afterpay and Touchcorp used to be small-cap stocks. No one really knew about either of them. But today, they’re worth over $3 billion combined.
They’re now a household name, a large-cap stock.
There will be more like Bellamy’s. There will be more like Afterpay Touch Group. We know they’re out there now, and that’s why we’ve put together a special report highlighting three ASX stars we think will be the next ASX 10X stocks.
Editor, Australian Small-Cap Investigator