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// By Richard Revelins
Why Buy Australian Dual-Trading MicroCaps? “Buy low- Sell High”, we hear that all the time, it is initiatively obvious, and pretty much the way in which the majority of so-called hedge funds and institutional investors outperform the market.
T
he term, “Hedge Fund” is often a mis-used description, as most hedge funds don’t in fact “hedge” anything. They prefer to invest at an early or development stage of a company’s growth cycle and use their financial backing and corporate influence to grow the subject company into a much larger business, to then on-sell to later stage investors, or the general public, through a trade sale, an Initial Public Offering (IPO) or into a SPAC. They can do this because of their well-established financial engineering models and depth of expertise in certain industry sectors.
So where does this leave ordinary investors? Generally, this leaves ordinary investors paying full retail at the IPO stage, when the smart money is already in at a fraction of the eventual issue price. OK, so how can I get into an investment at an earlier stage and what are the risks? Investment is always a risk/return equation. The greater the risk the greater the anticipated upside should be, and the converse applies for larger established, dividend paying investments. If you have little, or no risk tolerance, then you are probably not a MicroCap Review Magazine subscriber in the first place! The common idea behind microcap investing is we are all looking for that diamond in the rough, or that undervalued/ overlooked/misunderstood investment opportunity.
90 MicroCap Review Magazine
How do Aussie Microcaps provide superior investment opportunities? I have opined on this subject before, but simply it comes down to structural differences between US and Australian equity markets. At the top end these markets function fundamentally in the same way. Share prices and markets caps are a function of fiscal performance, industry outlook and earnings multiples. At the earlier, more speculative microcap end, it is more to do with the past track record/credibility of the management teams, the robustness (if that is a real word) of the project and the level of appetite in the market. As a career wide speculative investor I have had investments which have made 10, 20, 50 time return on capital, and I have also had investments where I have lost the lot.
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