Stock Selection Method: Four Strokes Of Small Cap Stocks

In the past two years, the stock index has changed and the pattern has not changed.

The first step is to select small capitalization stocks with the lowest share price.

Target selection: all A shares.

Screening conditions: the total share capital is less than 300 million shares, the market rate is below 6 times, and the stock price is below 20 yuan.

Screening results: a total of 286 stocks were listed.

Among them, there are 70 main board companies, 216 small and medium sized boards and GEM companies.

According to the author's statistics, the gem and the small and medium sized board are the "concentration camps" of small cap stocks, and also the land of "tiger crouch".

Over 80% are private enterprises, including family businesses.

It seems that private enterprises' access to small and medium sized boards and gem on the capital market has become a way to achieve "Phoenix Nirvana" for private capital.

After several years of exploration and development, the number of Listed Companies in small and medium-sized boards has far exceeded the scale of the main board market in Shenzhen.

From the perspective of the structure of small and medium-sized listed companies, most companies have the characteristics of high technology, high growth and innovation.

Moreover, the industry distribution of the small and medium-sized board listed companies is more diversified and rationalized, which basically covers the industry distribution of the main board market.

The second recruit: the prospect of picking is worth looking forward to.

Screening targets: 286 left in the first round of screening.

Screening conditions: the annual net profit growth rate exceeded 50% in 2010, and the annual increase was between 0-80%.

Reasons for screening: sustained growth of performance reflects capacity for sustainable development; stocks with excessive gains last year were less likely to become bull stocks again this year.

Screening results: 40.

In addition to the small share capital, the sustained growth of performance is the cornerstone of supporting the rising share price of Bull Stock.

Small and medium-sized stocks, coupled with their high growth, have been one of the hot spots in the market.

Suning Appliance was the best representative of such stocks. When it was listed in July 2004, its share price was only 29.88 yuan, and by October 2007, its stock price had exceeded 1000 yuan after its reinstated share price.

In the past two years, the A share market is still on the scene. Dehao run DA and San an photoelectric are outstanding representatives in 2009. The annual increase of two stocks reached 469% and 405% respectively, and the Eastern garden and Golden Mantis took the baton in 2010.

Last year, stocks with the biggest gains were mostly supported by performance.

Data show that in the middle and three quarters of 2010, the net profit of parent companies increased by more than 30% in the middle and the fourth quarter of the year, accounting for more than 80%, of which the increase in the second and third quarter of 2010 was more than 30%, accounting for 50%.

From the perspective of profitability, the SME board and the gem are generally better than the market, while the SME board and gem are better than the latter.

In addition, according to the latest statistics, the EPS growth rate of small cap stocks in the 3 years from 2010 to 2012 will reach 50.8%, 37% and 29.1% respectively, significantly higher than the 31.6%, 22.2% and 18.8% of large cap stocks.

After the increase in 2010 net profit is greater than or equal to 50% as one of the terms of stock selection, the stock market with a gain of less than 80% is screened at the same time, so that the small and medium-sized stocks can be reduced to 40.

The third step: pick the leading stocks in the hot industry.

Screening targets: 40 left in the second round of screening.

Screening conditions: the company is in the industry of national policy support, such as seven new industries, consumption and so on.

Reasons for screening: the theme of the Chinese stock market's annual hype is related to the policy of the year. This year is the year when the year 12th Five-Year begins, and the relevant policies are inclined to new industries.

Screening results: 20.

At the same time, we should also take into account the characteristics of the industry at the same time.

Comparatively speaking, the greater investment charisma of small cap stocks lies in their good growth.

Compared with large market capitalization companies, small and medium-sized enterprises are mostly in the growth stage of life cycle, have larger expansion potential, have higher performance growth space and investment value. Under the background of sustained economic development, thanks to policy support, a group of excellent small and medium enterprises will emerge in the future and become the engine of China's economic growth.

At present, the adjustment caused by the lifting of ban on GEM stocks and small and medium board stocks has been digested, and the investment value of some new industries stocks with good performance and high growth has been revealed again.

This year, the investment direction of small cap stocks is quite clear, that is, along the "12th Five-Year plan" to find opportunities for investment in emerging industries, there will not be many objections to this market, but there are two points to note: first, the small cap stocks change too fast, which may lead to market turbulence and control positions; the two is to choose the potential varieties of small cap stocks as far as possible in order to avoid the risk of market volatility.

Based on the understanding of China's economic pformation and emerging industries, investors are advised to focus on three major investment themes: first, energy conservation, environmental protection, two high-end manufacturing, and three, innovative consumption.

In view of the above analysis, the selected industries are mainly non durable consumer goods such as food, beverages, liquor, or emerging industries such as new energy, new materials, biomedicine and so on.

According to the attributes of Shen Wan II industry, the author eliminated the main business of textile, rubber and real estate stocks, and 20 small and medium-sized stocks were left.

The fourth trick: pick the most small stocks of shareholders.

Screening targets: 20 left by the third round of screening.

Screening conditions: among the top ten tradable shareholders, there are public offering funds, private equity funds, venture capital institutions and cattle scattered.

Reasons for screening: the main body has been paying more and more attention to small cap stocks since the two quarter of last year.

Screening results: 6.

The author looked at the 20 small and medium sized stocks screened out in the third round of the three quarter of 2010, and found that most of the companies had not yet received the concern of institutional investors. The top ten tradable shareholders were still dominated by individual investors, while some of the top ten tradable shares of the stock market were also gathered in the East, but a new private equity fund was added to the fund, but other funds appeared in the three quarter of 2010.

This type of stock is still not the preferred target of investors.

From the data of the end of the three quarter of 2010, 10 of the top ten tradable shareholders of the cattle stock account for half or more of the funds.

According to this idea, the author selected 6 small and medium-sized stocks in particular.

After selecting the stocks, we must firmly hold shares.

I have done such data statistics, many investors have no problem in choosing stocks, the problem is on the stock ownership is not firm.

Staunch ownership does not give up stage opportunities, and investors can carry out band operation based on KDJ and SAR indicators.