Factors When Considering Microcap Stocks

What are the fundamental factors one should consider before buying a micro cap stocks? What is your pick for the long-term which you think will be 10 bagger?

Thanks

 

A: Thanks for the question.

The fundamental factors to consider when buying a microcap are exactly the same as those you would use to buy a large cap stock. There are some other factors to consider:

  1. Liquidity – or potentially, lack of liquidity;
  2. Influence/control by major shareholders (including executives); and
  3. In some cases – corporate governance arrangements.

Liquidity (or lack of liquidity) means that you may need to be patient when both entering or exiting a position.

I don’t invest in microcaps directly.


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