Do you think its dangerous to get into a small or midcap sector at the
present time? These have obviously been hot for the past few years and
a cool down would probably not be received well by the likes of PRNHX,
etc.
I am in PRNHX and continue to add to my position. I add kore to other
asset classes right now, but I am adding to my small cap and mid cap
positions.
Rob wrote:
> Do you think its dangerous to get into a small or midcap sector at the
> present time? These have obviously been hot for the past few years and
> a cool down would probably not be received well by the likes of PRNHX,
> etc.
I think it's more dangerous to get into large cap stocks! Take for
example the largest such as C and GE. The problem for future outlook is
that everybody already owns these large cap stock, and
fund/institutional ownership has been "exhausted" (in my opinion). That
leaves very little room for increasing stock price since that would
require many new owners.
Compare that to up and coming companies, that are small today and not
institutionally owned. Once the company becomes larger or higher
profile all the funds will start jumping on board, making the price
absolutely soar. The prices of large cap stocks just can not soar for
this reason.
Sometimes people say you should stay in large caps because they are
well established, backbone of the market, etc. This is true however if
you perceive a kind of market environment when you are afraid of
everything except large caps then you just should be out of the market
period. This is where I am at, I do not like the prospect of US stocks
mainly because of the direction of the US dollar. Then again I'm an
"alien" so my situation might not apply to you.
<> wrote
> I think it's more dangerous to get into large cap stocks! Take for
> example the largest such as C and GE. The problem for future outlook is
> that everybody already owns these large cap stock, and
> fund/institutional ownership has been "exhausted" (in my opinion). That
> leaves very little room for increasing stock price since that would
> require many new owners.
That's an interesting theory but I don't agree. If a company like GE can
continue to grow earnings, develop new products and businesses, the stock
price will reflect that.
> Compare that to up and coming companies, that are small today and not
> institutionally owned. Once the company becomes larger or higher
> profile all the funds will start jumping on board, making the price
> absolutely soar. The prices of large cap stocks just can not soar for
> this reason.
But they do. In January of 2003 GE was $25, now it's $35 and it's been
paying a dividend right along. That's a 40% gain + divs.
Look at Exxon Mobile, Proctor & Gamble, etc. Check out the Dow 30 and you
may be surprised how well some of these big caps can move.
> Sometimes people say you should stay in large caps because they are
> well established, backbone of the market, etc. This is true however if
> you perceive a kind of market environment when you are afraid of
> everything except large caps then you just should be out of the market
> period. This is where I am at, I do not like the prospect of US stocks
> mainly because of the direction of the US dollar. Then again I'm an
> "alien" so my situation might not apply to you.
The direction of the dollar has been up.