Size still matters
On the one hand, stocks of global companies have done well because corporate profits have been strong, in spite of sluggish economic growth. Some companies, such as commodity based companies, whose fortunes are particularly sensitive to economic activity, are languishing because of that same sluggish economic growth. That seems to be as true for large companies as it is for small companies. It appears that the market is ‘voting’ that the prospects for junior mining and exploration stocks are grim and will stay that way until demand for riskier investments significantly increases.
From a psychological perspective, there could also be a perceived safety factor that is steering investors into what they believe to be “less risky” investments. Investors burned by the collapse in prices of speculative junior mining and exploration stocks may be looking for ‘safer’ ground and turning to so-called ‘blue chip’ companies. As Benj Gallendar points out, from a contrarian investing point of view, the perceived safety can actually be misleading.
If investors buy into a large company that has run up significantly in price, which is often the time that investors typically do pile in, the danger for a substantial price reversal is quite real and the risk for getting burned quite high.
In the next part of this interview with Ben and Benj, we cover some tips for first time investors and what they think investors can do to help themselves succeed at investing.