The Investor Diary Entry #11: January 31, 2023
Investing is for sure a learning journey. It is for sure learning about investing, but the learning that I am valuing more is learning more about myself and what I want. I am learning more, about what kind of investment suits me, and I am more relaxed with. Just yesterday, I started a new way of searching for investing opportunities. I am now searching for and choosing the best small cap value stocks that suit my criteria.
Since the beginning of 2023, the market has been going up. While the market is up, it is hard to find stock buying opportunities. This made me start scanning for companies that fit my criteria.
While I was doing the scanning, I realized that I was looking for value stocks irrelevant of their stock price. Meaning, even if the price of one stock in a certain company is above my investing budget for one company, I would still buy any fraction of a stock.
Yesterday, I realized that I could refine my search to suit my investing budget.
Price Cost Averaging
When I first started my investing journey, I made few decisions before spending any money. First I decided on the total budget that I can spare for investing from my savings.
The second decision was how much would I be investing per company. I came to that number out of deciding that the portfolio that I would be looking at is somewhere between 15 to 35 companies.
The Third decision that I made is that I will not spend all the budget dedicated for one company at once. I would create three price notifications based on what I would consider a value price for a specific company; high, medium and low.
I would invest the first chunk when the price reaches the high price notification or below, another chunk at the medium notification, and the final chunk at the low price notification. Yet, the total amount that I would invest at these three levels is not all the budget dedicated for one company. I would only invest 60% of the allocated budget, and leave 40% to buy more if the price dropped further.
This is basically what is price cost averaging.
Investing In Large Cap Value Stocks
My searching process for value stocks was made on companies that are well-known to me. Companies that I would understand in general what they do and how they get their sales. Most of these companies were of course large cap companies, which were also very expensive.
Even when I find a company that hits one of my value price notifications, the price per share would be high that I would only be able to buy a very small amount of stocks in that company. Sometimes I would only be able to buy a fraction of one stock per price notification level.
A few months down the line from the day I started investing, my wife – my girlfriend at the time – told me, “why don’t you check drone manufacturing companies?” They are still starting out, and the future looks promising for the industry.
Public Drone Companies
After that conversation with my partner, which made total sense to me, I went to search for such companies. Many of them were at the initial investing series or private equity companies. Then I started finding some publicly traded drone companies.
It was very hard to analyze public drone companies, or find value stock opportunities with the industry. They were either very new without enough data to analyze or they were expensive.
What I did then was that I chose the small cap drone companies and invested one chunk budget in each of those companies. Yes, I broke my criteria for this industry.
Today, after the rise in the market in 2023, most of those companies are in the positive, and with short term thinking, I wish that I invested more in them at those low prices. Since I still have no data to calculate a value price, I am not able to invest more in them. Investing more in them will increase my exposure, as anything can happen to the market, and specially that they are new small cap companies. Some you can also call penny stocks; therefore, anything can happen and their risk is high.
Factors Coming Together
The fact today that my positive portfolio is largely coming out of small cap companies, namely, the top commercial drone companies; in addition to the fact that market is going up making finding value stock buying opportunities harder, were pushing my mind into finding a better way to decide what is a suitable opportunity for me.
Investing in value large caps stocks is something that I would most certainly prefer, but with the small budget that I have to invest, this method will not bring back a good return for me.
Many analysts, not all and not most, but many analysts are predicting a market crash. This was the final factor that came into play to design the way I look for opportunities.
For now, I would leave my very small number of stocks in large cap stocks as they are. I would now be looking for small cap value stock opportunities, and wait if a crash really happened, I would load up on those companies that today I cannot afford to invest in.
Conclusion
I am really enjoying my time in investing, I am also enjoying writing this diary which is also helping me organize my thoughts with regard to my investing journey.
What I am enjoying about investing is that it is making me learn many things about myself. It is somehow giving me the opportunity to face myself in my own mirror on daily basis.
Now that I reached this decision about finding small cap value stock companies, I feel more relaxed that I found what really suits me at this point in time.
The Investor
Tuesday 31 January 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
For a more detailed information on my affiliate disclosure please refer to the Full Affiliate Disclosure page, and if you are interested in building your own online business you can check this post here.
Furthermore, this site is in no way or form is giving any financial or investing advice, nor it is encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share for informational, educational and entertainment purposes.
Investing is a journey full of excitement and full of lessons and learning.Every day we learn new things and find the right path، and this progress never ends.
Your story mentioned that you sought to know more about yourself and also what you are really interested in through investing, and to me that’s the most important thing in life.
You are absolutely right. I found that the investing journey is a real journey into my inner self. The relationship with money uncovers many hidden aspects that we didn’t know about ourselves.
I appreciate your blog in that you are writing about something you are in the process of learning. It is written with the beginner investor in mind, and that helps me feel at ease…considering I know nothing about small cap investments, but really want to learn. So, one question I have is what made your wife suggest drone companies? Did she have some experience with these types of companies or was it something she had heard about? It’s a curious question because I am trying to figure out the best types of companies to invest in as well, but am having trouble trying to figure out what would be best.
Yes, I am documenting my journey for my own benefit so that I can see my progress, second, I am it public since some readers might find it useful one way or the other.
My wife has a general sense of business and opportunity. Yes, she heard such a recommendation, and we both discussed its future potential as an industry. We found that commercial drones and their applications will increase over time.
When I started looking at the companies, it was very difficult to choose which ones to invest in since most of them are new and there is not enough data to analyze. Basically, any of them can fail, and any of them can fly.
The flavor of stocks to invest in really depends on what makes you sleep at night. Don’t choose a strategy or instrument that will make you get worried all the time.
Small cap companies are risky by nature, some have all their portfolio in them, others diversify with different weights, while many choose to run away from them.
I hope I answered your question, and if there is still anything that needs further clarification, please don’t hesitate to ask.
In this informative blog post, the author provides useful insights into the world of small-cap value stocks. With a clear and concise writing style, readers are guided through the process of selecting the best small-cap stocks to fit their personal investment strategy. The article covers key factors that investors should consider before making any investment decisions, including market trends and company financials. Overall, this blog post is a great resource for anyone looking to navigate the world of small-cap stocks. It’s informative and provides a great starting point for anyone who wants to become a savvy investor.
Hello Terry, thank you very much for your comment that describes the intention of this article. As much as I am writing this diary to document my own development, and as a way to better my learning by explaining to others what I am doing, which is a great way to make information stick in the brain, I am also considering the fact that my journey might help someone who is just starting the investing journey, or even a seasoned investor might find some points that would put things into a new perspective. Something like going back to the basics.
Small-cap companies are normally avoided for obvious reasons, but I am also looking at them within specific industries.
Thank you Investor for taking the time to share your stock purchasing journey and give your readers some insight into what has lead you to adjust your current philosophy to prefer the small cap value stocks. I am a novice on this subject and somewhat naive to whole enterprise in general. Some of these terms seem to speak for or define themselves but at the same time I don’t want to assume that I know what they mean. I never read an actual definition of what a small cap value stock is other than your quick comparison to penny stocks. Are were basically just talking about very small new businesses or is their something else that puts these particular stocks in the small cap value category. I am sorry if the question seems too simple, I am just trying to grasp the topic. Thank you for all your efforts, I commend you for sorting through all of this technical jargon for us newbies!
Thank you very much Joseph.. First I want to thank you very much for drawing my attention that I need to be more careful in assuming that such terms are understood.
Being a company that has stocks traded publicly means that the company has been around for a while, but the fact that it is a small-cap company means that its capital value is small. The stock price multiplied by the number of stocks gets us the Market capital value.
It is also called market value or market capitalization.
A small capital (small-cap) company is considered as such if its market capital value is between $250 million to $2Billion.
I hope this clarifies the term, and will for sure be careful in the future to further explain such terms when I use them.
Thank you again for your question as it drew my attention to a very important aspect of my diary.
I’m thrilled to have come across this article on choosing the best small cap value stocks at The Investor Diary. It provided me with valuable insights and practical tips for navigating this segment of the market. The article’s user-friendly approach made it easy to understand the strategies and factors to consider when selecting these stocks. I’m excited to apply this newfound knowledge to my investment journey and explore the potential opportunities that small cap value stocks offer. Kudos to The Investor Diary for delivering another informative and user-centric piece!
Thank you Steve very much for your feedback. Many experts warn investors of small-cap companies, but they can’t be blamed. It is for sure a risk, but what I like about them is that one can easily invest USD100 and wait. I couple my choice with an interest in an industry that is still in its infancy. This way we are looking at a new company in a new industry. I know it is double the risk, but there is also the study of where the world is heading.
Thanks again Steve.. 🙂
Investing is a very delicate process that requires certain knowledge, skills, experience, and the ability to take risks. I like that you made your site in the format of a diary, and not in the format of expert advice. It generates interest and trust. I would like to read your diary and learn more and more about your experience. I sincerely wish you, as well as all your like-minded people, good luck in your business!
Thank you Hanna, yes the objective is to make the world of investing an approachable concept. Many experts made it sound as a world that only the experts can benefit from. If investment was a general global culture, then we would be seeing all that money setting in banks doing nothing. If that money is utilized then the wohole world economy would improve whether locally at a country level or globally