Investing in a broad array of great companies takes hard work and a lot of research. However, expanding your horizons and incorporating small, large, and mid-sized companies into your portfolio is a must. The truth is that there’s no one “right” way to invest, only a positive momentum that you can infuse into your asset holdings through the implementation of a consistent, winning strategy. For many, this includes the use of both small and large companies, yet others will say that only one subset of corporate entities graces their portfolio.
Getting your strategy right is all about tweaking your methodology and experimenting with a number of different options in order to find the blend that works best for you. With all that said, there remains a few important aspects to your approach that must be explored in depth before you can start making headway in the marketplace.
Understand the use cases for large and small companies.
Investors rely on a variety of different data points when selecting companies and assets to invest in. For many, the P/E ratio, second quarter, third quarter, or second half earnings reports, market capitalization, and price trend lines over a few different time periods offer a great starting point for analysis. These figures are often starkly different among large and small companies and across industrial sectors as well. This means that evaluating a variety of different corporate options is a must in order to develop a sense of baselines that will give your portfolio structure over the long term.
To put it simply, small companies—as a result of minimized market capitalization—can grow at faster rates because growth in value at the hundreds of thousands or single-digit millions price range happens much quicker than growth amongst companies that are valued in the billions. For instance, companies like Microsoft or Apple would have to decimate the other’s consumer base in order to double underlying value—an outcome that is virtually impossible. Yet a smaller brand can grow quickly because it isn’t typically contending with a fully saturated marketplace. On the other hand, Microsoft, Apple, and other companies of this value band are stalwart institutions and have little chance of losing huge revenue figures or going out of business.
The tradeoff is a fascinating one, and many investors gain the greatest upside by mixing large and small industrial players as a result.
Select industries with excellent growth potential.
Regardless of the size that you choose to focus on—or augment your current holdings with—selecting winners that will last for years to come is essential. Brands that promote broad spectrum hemp oil, for instance, are growing in popularity amongst investors looking for new opportunities to branch out into. CBD and hemp oil users are growing in number as the legalization of cannabis more generally continues to gain steam across the U.S. and the world. As a result, the cannabis industry is growing in strength, and producers are becoming more mainstream. CBD oil, hemp products, and other cannabis plant extracts are beloved by many, and publicly traded cannabis companies offer a great starting point for an investor looking for growth potential in a smaller brand.
On the other end of the spectrum, large corporate entities like Alamos Gold offer investors a tried and true winner in the gold mining space. Alamos Gold (NYSE:AGI) extracts hundreds of thousands of ounces of gold each year across three active mining sites (Alamos Gold operates the Mulatos Mine in Sonora, Mexico, and Young-Davidson and Island Gold Mines in Northern Ontario). Alamos is also in the process of unveiling a number of other locations in North America and the Republic of Turkey that will bolster Alamos Gold’s overall productivity as a whole. Analysts predict a continued surge in pricing in the gold market and amongst gold miners like Alamos who provide the marketplace with this valuable commodity asset itself.
With these lessons in mind, making great investment decisions is simplified.