The Huge Story in Small Caps That Nobody Is Talking About
Editor's note: Recently, we've focused a lot of attention on Matt McCall here in the Digest...
As the newest addition to Stansberry Research, Matt targets investment opportunities with 10X... 50X... even 100X upside potential. And he does this by identifying the most promising companies within the life-changing growth stories he believes will power the next decade...
In today's Masters Series, Matt details a compelling trend playing out in the market – that most investors are completely ignoring. He explains what this opportunity means for his investing thesis... and how it could lead to massive long-term profits...
The Huge Story in Small Caps That Nobody Is Talking About
There's a massive story playing out in the market right now. And nobody is talking about it...
Yet it's flashing some of the strongest buy signals I've seen in a while.
The Russell 2000 Index rallied to an all-time high on Wednesday... and broke out of an unprecedented nine-month-long consolidation period (a time when it didn't have big moves up or down).
Why is this significant?
It's significant because the Russell 2000 is a small-cap index. It measures the smallest 2,000 stocks in the market-benchmark Russell 3000 Index.
Large-cap, blue-chip behemoths are important in the stock market. They generate massive amounts of revenue and keep the economy moving. But they aren't the kinds of stocks that will create exponential growth for patient investors.
Those are the small caps.
And I follow these small-cap stocks closely in my newest research service, Matt McCall's MegaTrend Investor. They're the stocks with the potential to grow 3X... 5X... or 10X in size. Some might even grow 100X.
I employ a "top down" strategy in my investments...
I spend thousands of hours per year searching for the "hypergrowth megatrends" that will change our future – think electric and autonomous vehicles, artificial intelligence, the blockchain, the future of health care, 3D printing, and the "Internet of Things." Then, I drill down into those megatrends to uncover the companies leading the charge into the "new world."
Don't get me wrong... Amazon (AMZN) is changing our future. So are Facebook owner Meta Platforms (FB), Apple (AAPL), and Alphabet (GOOGL).
But because these companies are already worth hundreds of billions of dollars – in some cases, even trillions – they can't possibly generate the kind of wealth that we as hypergrowth investors are looking for.
In order for Facebook to grow 10X in size, it would have to become a more than $9 trillion company.
If Amazon were to grow 5X in size... it would be valued at nearly $9 trillion.
And if Apple were to grow just 3X in size... it would be worth about $7.5 trillion.
I'm not saying that isn't possible. But it could take some time.
However, a small-cap company can more easily grow 10X in size. The average market cap of the 13 stocks in my MegaTrend Investor model portfolio is $1.9 billion. If a company of that size grew 10X, it would still be worth just 1/92nd the value of Amazon...
If it grew 100X, it would still be only 1/13th the size of Apple!
That's why I'm not looking for today's biggest, most well-known businesses. Instead, I have my sights set on the next Amazon... the next Alphabet... and the next Facebook (or Meta Platforms, as it's now known).
And today, those stocks are tiny.
So let's circle back to the breakout I mentioned above. The following chart shows the iShares Russell 2000 Fund (IWM), which tracks the Russell 2000 Index...
Technical analysis is a key part of my long-term investing strategy. It tells us that the longer a chart consolidates, the bigger the rally will be once a breakout finally occurs.
As I explained earlier, the Russell 2000 consolidated for nine months – a very, very long time for a major stock index. And the fact that other major stock market indexes were rallying while the Russell 2000 consolidated makes its action even more significant.
Take a look at the chart below. It compares IWM to the iShares Micro-Cap Fund (IWC) and the Invesco QQQ Trust (QQQ), which tracks the large-cap Nasdaq 100 Index. As you can see, IWM and IWC were held back while QQQ rallied...
I believe what we're seeing right now is the beginning of a very big, very long rally in small-cap stocks. And that's fantastic news for the kind of investing I'm interested in.
Think back to the 1990s. It was one of the best decades ever for stocks. As breakthrough technologies converged, the market quadrupled in value... and many of the most innovative stocks grew even more.
It was during that decade that big U.S. tech companies started to take over – Microsoft (MSFT), Cisco Systems (CSCO), Intel (INTC), and AOL became global juggernauts.
The key to making massive long-term profits in the 1990s was to get into these companies early. You had to invest in them when they were small-cap stocks... before they made their big runs higher.
The same thing is happening now. As I explained in last weekend's Masters Series, life-changing technologies are coming together to change our future. The companies making these transformations happen will hand patient investors incredible wealth over the next decade.
These companies are small today – in fact, many haven't even been created yet. But before long, they'll be household names. And at that point, the big money will have been made.
Don't let this opportunity pass you by.
Here's to the future,
Matt McCall
Editor's note: Matt says the coming breakout in small caps is creating a "perfect storm" for the 13 stocks he just introduced as part of his brand-new MegaTrend Investor model portfolio.
The portfolio is already up nearly 30% on average... but it's not too late to get invested. In fact, Matt believes the biggest gains are yet to come. Click here to get started.