Renewed Interest in Large Caps

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Author : Alexander T.
Date Posted : 2014-21-09

Lower trading fees, combined with well managed and profitable companies like Air Canada, Bombardier, and Just Energy, make large caps a better consideration, when choosing companies to trade.

An interesting trend appears when you study the differences between large cap and small cap companies. Large cap companies are more stable, small cap companies are more volatile.

You need to buy a greater quantity of shares when trading small cap companies, than large cap companies. When you calculate the amount of shares you need to purchase, the money you invest will is the same whether you’re investing in a small cap company or a large cap company. -->


Any company with a stock price below $1.50 is not making money. It doesn’t matter what index you search through the result will always be the same. Only a half dozen or more companies show up in your search results.

According to a posting on Keystone Financial there are fewer shares to buy or sell. That means small caps can move fast on small pieces of information. The savvy and well researched investor, they can make allot of money fast, but those who aren’t can also lose lots of money

Try an experiment. Look through the financial statements of each company, and note the profit or loss on each company, you selected. Next go through the lists of large cap companies above $3 a share. The average volume should be over 250 000.

Many companies will in your search will be profitable. Small cap companies are a disappointment. They survive on private placements, and share consolidations.

Large cap companies are solid investments. They are focused on the investor, they keep their expenses in check, and keep the investor informed.

According to Michael Murphy, in 2001, “There are these great companies that are significantly undervalued”. Small cap companies don’t get traded regularly and are ignored by many investment firms. According to U.S. Bancorp Piper Jaffray, small cap companies with a market cap under $250 000 is to look for a strategic acquirer, or go private in a management led buyout.

Although small cap companies are undervalued, and very volatile, they should not be entirely discounted. Some show significant progress like Lorus Therapeutics now known as Abtose Biosciences. -->


It is a clinical stage company with a focus on the development of new therapeutics, and molecular diagnostics targeting the mechanisms of cancer. It recently changed its name to reflect the development of its leading product, called APTO-253 (formerly LOR-253). The term, “Apoptosis” represents the cells self killing mechanism of cells on the outset of cellular damage, and the cancer cells ability to stop this mechanism.

Abtose Biosciences, is still losing money, but is keeping the company on track with their focus on the leading product APTO-253. Investor interest in Abtose has steadily increased from two years ago. Currently at around .50 cents a share, this company rose from a value of .20 cents to .50 cents a share two years ago. In 2010 this company fetched a price of $3.00 a share, and has made a tremendous comeback with the ongoing development of its leading product, APTO-253. This is a company to keep an eye on, it is not a good time to buy in right now, but may be a consideration when it starts making money again; however, this company may become a perfect target for a buyout, when it starts posting profits.

Small companies that slowly increase in value, become a greater target for a takeover by a larger company. When they get taken over, shares are consolidated, and you may end up losing money in the end.

Companies on the TSX are more likely to do share consolidations, than companies on the junior exchange. The rules for companies on the TSX are stricter, and companies are forced to consolidate if there share price keeps falling.

Profitable large cap companies, will always be the standby of investment firms. They are solid and dependable. Throughout the course of the year they usually trade around the same stock price, and volumes always remain constant. When looking from a large cap company to invest in focus on companies with volumes of 500 000 to 1 000 000. Volumes can give you some idea of the type of movement you can expect.

Sometimes the stock price will fall after you buy it. Don't despair, it will return; however, you may need to wait a month before it does, and you may have to wait longer before you can cash out.

The trick is to wait, track the company you're interested in, and jump in at the lowest point over a 3 month period. Your trades should be in quantities of 25 to 100 shares. Large cap companies, usually bounce around between .20 and $1. Take a look at Air Canada and Just Energy for an example of what I mean.

Its all about risk. Don't be greedy, and do your research well. When investing, focus on large caps, consider mutual funds, don't take other peoples advice, and don't buy losers.

How to Survive Share Consolidation

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Share Consolidation is a process that a company undergoes when it changes the structure of all its issued shares. 

This can have good or bad consequences, depending on current shares you hold, and the share consolidation ratio. 

For example, lets say you have 2000 shares in abc company, and the ration is 20 / 1, after the consolidation, you will be left with, 100 shares. Depending on the share price, this can either be to your benefit or to your detriment. 

Companies usually apply for a share consolidation to strengthen their bottom line, and improve the companies financial situation, to comply with rules and requlations set forth by an exchange, such as the TSX (One of the main rules set forth by this exchange is that the market cap of a company cannot fall below 3 Million, to remain listed), or when they are merging with another company. 


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If you are trading in small cap companies, it is generally wise to buy 2000 shares or more. Should there be a consolidation, you have a better chance of ending up on your feet. The more shares you have, the better of you are. Depending on the stock price, it can also work to your disadvantage. 

If you own 10 000 shares, every cent is worth $100. Should you make the wrong choice, and the share price goes down, you can lose hundreds of dollars in one day.

Small companies on the big exchanges are the worst companies to own shares in. They are usually not stable enough to comply, with the listing rules and regulations. Although, they are not all bad, just very risky. 

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Some of them are actually in the black and paying dividends.  Be aware that at any point, they may resort to a share consolidation, to stay afloat. The trick is to get in, take a bit of profit and get out again. 

Consider the larger companies, with good income statements for long term investments, but be careful, companies in the black, are good targets for a merger. If one company takes over another company, the shares may be consolidated, to account for an increased share price. 

Lets take for example a company worth .53, and it is being taken over by a company with a share price several times it value, after the merger, the share price will be adjusted to match the value of the merged company. 

In this case the more shares you have the better off you are. I have learned that shares are usually consolidated after a merger on a basis of 1 / 50 shares, depending on value of the companies being merged.

Understanding what happens in a share consolidation, is very important when trading stocks on the stock market. Do your research, stay with companies that pay dividends, or have good income statements, wait before you buy, and buy as many shares as you can afford.

Headed for Recovery

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Finally, there is hope for the future of Versatile Systems Inc. (VV). I've been invested with Versatile Systems for the past decade. I've held on for the ride, buying in at around $2.89 cents a share.

Since then, I've watched my stock in Versatile Systems plummet. I held 1000 shares at the time and paid over $2 890 plus commission. I decided to hold on, because it wasn't worth selling out.

Since it was still a good company, I held on hope for a recovery. Most people would of given up, but I didn't. Its a good thing it was just profit I reinvested in the market, and not money I put in.

Lately, it started showing promise and hope for the future. Its currently trading at 3 cents a share. Volumes started averaging around 20 000, daily.

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I knew something was up, after poking around, I found out Bertrand des Pallieres Appointed Chairman of Versatile just increased his holdings in the company to 20.4%. Wow!

This is amazing. That partially explained why there was a renewed interested in the company. At that point I felt that I needed to do something.

The next morning I increased my holdings to 4000 shares. I bought an additional 3000 shares @ 3 cents a share. I never thought I would invest more money into a company I already hold, but you never give up on your opportunity's.

If a director feels strongly enough to increase there holdings, something has to be up. After some more research I found an interesting video on you-tube.

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Decide for yourself. If you have some money saved up, and you can buy 10 000 shares, do it now. Don't delay. 

Hypersmash.com

Stock Picking Technique that Works

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Aproximate Reading Time: 3 minutes

Choosing stocks is often like looking for a needle in the haystack. After years of searching through stock lists using the same technique, I decided to go at it a different way.

My usual technique is to look for stocks that are less than a certain price. In the past I tried to narrow it down by looking at top gainer lists.

I started trading on the stock market back in 2001, I used top gainer lists to narrow down my stock picks. Since then, the market and economic times changed.

I remember those days fondly and with excitement. Back in 2001, I choose mostly technology stocks and made a killing. I turned $1000 into over $12 000 in over four months. I was on the phone ever single morning, and I always traded when the market opened, and waited until it closed.




Times have changed and I lost 95% of my portfolio. I began trading with Jetform, now Adobe. It was doing well at the time, and I bought as many shares as I could on $1000.

I watched it carefully, turned it over, made a profit. Then I took the profit and bought a few more shares with another company. Since the stock market was doing well at the time, the economy was good, and the tech market was doing ecstatically, I was on a roll.

I kept going, buying a few more shares each time with the profit. Those were the days. Since then I have been looking to get back to where I was. Its been over a decade now, and I am still trying.

My dream is to live off the stock market. If I knew what I knew now, I'd of been much further along in my life. At the time, I should of taken the money out, and put it into my first real estate venture.

My fears were unfounded. I thought that 50% of my profits went directly to the government in capital gains tax. That's not the way it works.

I learned that if you make for example $5 000 on the stock market and $20 000 from your job, you are taxed on the basis of $25 000. Its calculated on your total income. Unfortunately, I didn't understand this concept soon enough, and I never saw most of the money I made except on paper.

Stupid. Stupid. Stupid. Thinking back, I realize how much of an idiot I was. Well, times have changed, and I am older and wiser now.

After lots of testing, I came up with a new technique. I look for companies that have a current price that is greater than the opening price.

I look at the movement of the stock throughout the day, buy it at a large quantity, (for example, 2000 units of abc company @.30 a share), and sell it off when it reaches my target price, which could be as little as .05. What I have learned is that the best price to buy stock at is .30 cents a share; however, it is allot more risky than buying from a higher priced company.




You need to be extremely careful when buying from small cap companies. Small companies, are trying to expand and get larger, by encouraging people to invest through their activities. It may take them years to accomplish their plans, and to grow the company.

Before I buy, I look at the news, and the stock performance over the last 3 months. This usually gives me a pretty good idea of the risk.

Other factors that you need to consider is the possibility of mergers and acquisitions. When one company goes to buy another company, your shares may be consolidated, depending on the value of the company it is merging with. The same thing can happen when a company is going bankrupt, and the people at the top, decide to change their industry to survive, and keep going.

My new stock picking technique appears to be working. Using this technique I have decided that it may not be good to wait until the end of the trading day to sell.

When you reached your price point, you need to take advantage of it right away. That's all I have to say for now. Good luck.