On the Spanish stock market, there are securities that, due to their low liquidity, are not followed by the analysis houses. Much of these investment proposals come from small and mid-cap stocks. They play a specific weight in national equities. To the extent that they are grouped in their own stock index. The Small Cups, where the listed companies that present these very special and well-defined characteristics are integrated. Do you want to know more about what these values are like?
Well, through this class of companies that they quote In the national stock market you will be able to develop your investments from now on. Neither worse nor better than through the large values of the selective index, but different. With new business opportunities, and who knows without new perspectives to face the new year with more innovative intentions when it comes to your operations in equities.
From this scenario, small-cap stocks play a determining role in all of your investments. With very well defined characteristics in all its values. You must know them so that the operations can be carried out with greater success guarantees. Through a wide range of proposals that cover all the stock market sectors and a good number of business lines.
Capitalization: what are the values like?
Small caps are distinguished primarily by the fact that very few stocks are traded in the markets. In some cases under quite ridiculous amounts. With very little interestboth on the part of buyers and sellers. In this way, the stock price is easier to manipulate by the strong hands of the markets. From this point of track, it can be considered as really dangerous values for your interests as a small and medium investor.
With very few titles they can move their prices at will. In addition, they present greater volatility than other securities. With very violent fluctuations in prices, which can reach in the same trading session above 5%. Even in certain cases above 10%. With very wide differences between their maximum and minimum prices. As a consequence of this characteristic, they are proposals that enjoy speculative investor predictions. Very suitable for the regular operations of traders.
Another contribution that this class of values generate is that they are more sensitive for the spread of rumors about their companies. On the other hand, they do not form part of the recommendations of the main financial intermediaries. Nor are they part of the investment portfolio made by brokers. In this way, you will have less information on the evolution of these companies that make up this peculiar group of values.
How to operate with these companies?
If you wish to operate with these companies that are listed on the national continuous market, you must abide by the same rules as in the large values of the national index. Although with small differences that you should take into account from now on. The first one is that are less recommended for longer terms. It is convenient to settle them as soon as possible the better. To avoid more of a scare in your quotes.
Other of its peculiarities is that its companies are more reluctant to distribute dividends among their shareholders. Of course there are, but their proposals are proportionally minor. And that they distribute it under much more modest amounts. Being this time stranger than exceed 5% in performance levels. It is a small handicap that they present towards the most conservative investors in the financial markets.
A new difference comes from what concerns companies with less specific weight in their respective sectors. Its relevance in the indices is not very relevant, with rare exceptions. All of them are from not excessively powerful lines of business. Or even newly created. Their prices are based more on expectations they create in the markets rather than their actual business accounts. Hence, on many occasions they vary so much with respect to the prices that mark their quotes.
What strategies can you use?
With small capitalization companies you will have to operate in a different way or at least under other parameters not as rigid as in the first level values. They will demand a different procedure when operating with these values. You must be very attentive to their quotes in order not to get more than one surprise at the least expected moment. Also, you should not drop their prices before any bearish scenario that is generated. If necessary, you will have to sell the shares before leaving part of your savings in the operations carried out.
On the other hand, it will also be very necessary that you can open the positions in the lower part of the band where the price of the shares move. If possible, very close to the environment of the supports. But as long as these levels are respected in the quotation of all trading sessions. It will be a very favorable technique for your interests. With the goal that you can go as far as possible to the area of its resistance. Not surprisingly, it is a very useful investment strategy that is used by all investor profiles. With high chances that you can achieve your goals. It is none other than achieving the maximum capital gains in each of the operations.
Another of the movements that can be very beneficial for your interests necessarily involves trying to take advantage of the peak moments in your price. It is what is commonly called in equities being in a hot zone. You will be able to realize this special situation because its trading volume it will be noticeably increased. In practice it means that the interest of the buyers will be much higher than that of the sellers. It is a clear signal provided by the financial markets so that you opt for purchases.
Revaluation potential
Some of these small-cap stocks have a higher target price than their current prices. Sometimes with discounts of up to 30%, even higher in the most aggressive proposals. Vocento or Pharmamar are some of the most relevant examples of the scenario. Especially if these movements are accompanied by a trend in equity indices that is as bullish as possible. You will not have to hesitate to open positions under the amounts that you consider most appropriate, depending on the balance of your checking account.
These stocks are generally the last to pick up bullish movements in the stock market. Since it is a way that investors use to make profitable savings. But be very careful, this situation affects all the values of these characteristics. But on the contrary, those who are in a better position to undertake very violent movements to the upside. Although, on the other hand, they are short-lived. You can last a few days or weeks, unless its uptrend is very clear. In which case, they can be perpetuated over time.
But for the same reason, they also generate high risks due to the high volatility that they regularly present. Therefore, the best way to operate with them is to know them and what figures they are developing week by week. Not surprisingly, some of them have undertaken very dangerous crashes in financial markets. As a consequence you can see yourself caught in strong downturns. And where it is very difficult to get out of their positions. It is something that you should anticipate so as not to get a negative surprise from now on.
Other characteristics
If these small values of the Spanish stock market are characterized by something, it is because they are very prone to developing corporate movements. Where they can vary with great power their current scenario in the quotes. With big ups and downs depending on these events. You can use them for your own benefit through very fast and short operations.
In any case, in some situations they are candidates to enter the first division of the national stock market. Through the reviews of the selective index that is carried out each quarter of the year. It is another of the elements that you must assess when analyzing this class of well-defined values. Generally each time these movements are undertaken, the financial markets receive the news with significant increases in the price of their shares. With percentages that vary between 5% and 15%. That can be taken advantage of with specific purchases during these processes in the stock indices.
Also of particular relevance in small-cap stocks is the fact that they are not very receptive to shaping the portfolio of small and medium investors. Perhaps as in your own case. Where they prefer more liquid proposals. Where you can enter and exit the places where their shares are listed. More easily and for the amounts you want. In this way, the operation is much better for the interests of all investors.
In addition, you have many proposals to choose from. You will not have excessive problems to select your favorite values. With all sectors and lines of business. From the most traditional to the avant-garde and with greater innovation. In a way it is a tailor's drawer where they accommodate all kinds of companies. Virtually no exceptions.