the way the economy is growing, i expect a lot of microcaps to become smallcaps and smallcaps to become midcaps than mid and largecaps growing bigger
Historically, this does not happen much though. A few will, but more often than not, most of them are unable to navigate roadblocks/changes well. Reasons could vary – recessionary impact, supply chain disruption, govt payment delays, leverage etc. Will it be different this time? Also, I find it hard to imagine people will herd into smallcaps with great growth visibility if there is a crash. Most of them are already richly valued – with relatively smaller float, a few key investors along with strong retail interest have pushed them up much too quickly in my view. Even assuming the growth triggers play out, it is hard to see funds get in even at slightly lower valuations to drive them further up. I could well be wrong, we will see.
That said, I wish I had taken your excellent Wockhardt note more seriously. I have been take by surprise by the rapid surge there. It’s not been a well-run firm for the longest time, so it’s a bit strange to see it take-off the way it has on the antibiotic breakthroughs narrative. A big miss for me, but I guess that’s part of the game.
Great post as always and thanks for all your contributions here. Fantastic food for thought.
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