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7
Investorfile explains its use of accumulating stock to its price targets
Posted by: Gerry Wimmer
8/7/2016
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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 to overpaying.

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.


Read Disclaimer:

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.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.