The Australian Securities Exchange (ASX) is a big market.
According to the World Exchanges Federation, the ASX at the end of 2017 was worth $2.034 trillion.
That was 9.8% bigger than it was at the end of 2016.
And if that same kind of growth is repeated, the ASX could be as big as $2.23 trillion by year-end.
That’s the total market capitalisation (market cap) of all stocks on the ASX. That’s around 2,147 stocks in total. It’s approximate because as we know some stocks drop off, some launch onto the market.
The good thing is that if you’re into investing in Aussie stocks, there’s plenty to choose from. And even more importantly there’s plenty of money to be made.
I mean, total market growth of 9.8%. That’s great right? And hey, even the S&P/ASX 200 (XJO) is up from 5,720.60 this time last year to 6,278.40. That’s a tidy 9.7% rise in a year.
Or is it?
Do you think it’s any coincidence that the gain in the ASX 200 is roughly the same as the total overall market growth?
Let us give you the answer there. It’s no coincidence.
You see, as at July 1 2018, the top 200 ASX companies have a total market cap of around $1.796 trillion.
In short, just 200 companies out of a total 2,147 are worth $1.796 trillion combined.
Just 9.3% of all the companies on the ASX accounts for approximately 88% of the entire ASX market cap.
That means that 90.7% of companies, 1,947 of them, account for around 12% of the total market cap.
Do you see the distortion there? We do. But it’s not so much a distortion as it is an opportunity.
Do you want single digit gains…or 10X gains?
The big end of the market is big — really big. But you simply don’t get the kinds of returns there that will transform a portfolio. Sure you can get single digit gains. If you’re lucky they might even creep into 10% or 11% gains in a year.
But you simply don’t get the high-risk, high-reward opportunities you do in the rest of the market.
Put it this way…
Would you rather try get single digit returns from 200 stocks?
Or would you rather try get huge double and triple — and sometimes quadruple — digit gains from a pool of 1,947 stocks.
You’re shooting for higher gains, but you’ve got exponentially more opportunity to get it from.
That is so long as you’ve got the right team on your side.
From our perspective there is simply no other area of the ASX where you can make life-changing returns than ASX listed, Aussie small-cap stocks.
We know this to be true because, over the years, we’ve been able to consistently find winners that deliver triple digit gains, and more than once uncovered a true 10-bagger stock.
Actually we can tell you we recommended a buy, and subsequent sell, to readers of Australian Small-Cap Investigator for both CleanTeQ [ASX:CLQ] and Bellamy’s Australia [ASX:BAL]. Both of these we exited with more than 1,000% returns.
And now, after months of in-depth investigation into the 1,947 potential ten-baggers, we think we’ve uncovered more just like CleanTeQ and Bellamy’s.
In fact we’ve put together a special report with in-depth analysis of three huge-potential (and high risk) stocks we believe will join the illustrious 10X club. To find out about them, their potential and how you can get your slice of the action, simply click here.
The proof is in the numbers
Of course when you start talking about huge potential stocks, the inevitable groans come from the sceptics. The conservative types, who are happy with single digit gains, simply won’t fish in the most exciting part of the ASX.
But those who are happy to take a little punt, to invest with the knowledge of the high risk but potentially huge reward, never look back.
And there’s good reason why.
Of those top 200 ASX companies, not a single one is worth less than $500 million.
And of those 200 there are just 19 that are worth between $500 million and $1 billion.
Yet when you look at the 200 best gaining stocks on the ASX yesterday, there are only four worth more than $500 million.
That’s right, just four.
AMP Ltd [ASX:AMP] is the only company worth more than $1 billion ($9.92bn) to crack the top 200 best gaining stocks on the ASX yesterday.
Look at a stock like Cape Range Ltd [ASX:CAG]. It was up 36.02% yesterday. Its market cap, just $183 million.
Or what about BidEnergy Ltd [ASX:BID]? Up 21.74% yesterday. Its market cap is $103.69 million.
Then there’s 4DS Memory [ASX:4DS]. Up 25.35% yesterday with a market cap of just $85.84 million.
To make it simple, just 2% of the best gaining stocks on Monday we would consider ‘large-cap’ stocks.
Almost all the really big gainers (98% of them) are small-cap stocks.
But one good day does not maketh the star investment…
In that case, let’s be fair and look at the broader market over a bigger timeframe.
Over the last year there have been 196 stocks on the ASX that delivered over 100% gains.
Now we hesitate to speak for you — but we’re pretty confident if your investments delivered 100% in a year, you’d be pretty happy?
Well of those 196 huge winners, just 18 are now worth over $500 million.
Again, to make it nice and simple, only 9.18% of what are now ‘large cap’ stocks were able to deliver more than 100% returns in the last year.
What does this tell us?
It tells us the bulk of really big winners are small-cap stocks. It tells us the likelihood of finding a real big winner, a 10X stock, in the ASX 200 is extremely slim.
If you’re at all interested in really making the big gains form the ASX, there is no other kind of stock to look at. You simply must be finding the best research, the best advice and the best stocks to uncover the next 10X stock.
And that’s exactly why we’ve put together our special briefing. To find out more just head here.
Editor, Australian Small-Cap Investigator