Stock price targets for Top Ideas prove to be a conservative
benchmark for the upside of Investorfile’s small cap picks.
Often our blog readers ask why stock price targets for Investorfile's
Top Ideas are rated as "Accumulate to.”
Here is our explanation.
At Investorfile we believe that our Top Ideas are
small/micro cap stocks that are largely overlooked by the investment community.
When the Investorfile blog initiates on a new Top Idea we believe that stock is
deeply undervalued based on Enterprise Value/EBITDA, Earnings per Share (EPS)
or revenue valuation basis. In our initial analysis we look forward no more
than 12 to 18 months and give credence to a strong balance sheet.
Investorfile price targets specify an opportunity for
investors to accumulate shares in a company at low valuation levels and before
the broader investment market recognizes the stock's potential. Over the longer
term, we feel this approach provides the greatest upside and some downside risk
Our accumulate share price targets inform investors how to
acquire growth stocks on a value basis and not on a momentum basis. No doubt the highest investment return comes from buying a
growth stock at its lowest valuation level. But realistically this is not
always possible. Therefore an Investorfile "accumulate to” price target
provides investors with a guideline to average their stock purchases under our
target price. By doing so, we feel the average cost base on the investment is
still low, which provides some margin of safety should the stock price fluctuate
from unexpected market conditions.
Our readers also ask A) why we do not revise our stock
price targets upward once they are surpassed and, B), does it mean our stock
picks should be sold at that point in time?
Here is our explanation.
All of Investorfile’s Top Ideas are headlined as small cap
"value" stocks, but they are still growth companies. We believe our
stock price targets represent an opportunity for investors to take advantage of
the market's inefficiency from the mispricing of selected growth stocks.
Generally speaking, when our price targets are exceeded, the Company’s
operations are excelling and the broader investment community has begun
following and investing in the stock.
Even though Investorfile continues to provide updated blog
posts on all its Top Ideas, after our price targets are exceeded, we do not
feel the need to issue new targets. At that point we feel our job is done. We
have uniquely positioned the Investorfile blog as a "first mover” on small
cap/micro cap value investment opportunities.
In answering part B, to date, 10 of 17 Investorfile Top Ideas has
have had their stock price targets surpassed by an average of 141%. This proves
that our price targets are a very conservative benchmark to the upside
potential for our Top Ideas.
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.