You get what you pay for: Expensive small caps are significantly outperforming cheaper ones
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Small caps usually cost less than their larger peers. While they can have quick surges of growth, they can go down just as easily through shareholder selling or dilutions through capital raises.
But there are around 140 small caps that cost $1 or more per share and the saying, “You get what you pay for”, rings true here.
In the last 12 months, these stocks have had an average gain of 32 percent.
In contrast, all remaining small caps with share prices under $1 lost nearly 27 percent.
While indeed some stocks over $1 have risen from below the threshold, others have been above and continued to grow. The most 10 expensive small caps gained an average of 95 percent between them.
Looking at the entire market, 7 of the top 9 small cap performers across the entire ASX are $1 or more. The biggest winner in the last 12 months is Bidenergy (ASX: BID), which has skyrocketed 720 percent.
The company offers a subscription software which monitors electricity bills and alerts its customers to lower rates available, allowing them to switch. It services consumers and a wide variety of organisations from Singaporean telco Singtel to the Salvation Army.
The second biggest winner, Purifloh (ASX: PO3), first climbed above $1 when an American businessman paid $2.40 per share when the company was only 50 cents per share. But it has continued to rise since and is now $3.51, 513 percent above its price one year ago.
Among the other substantial gainers were City Chic Collective (ASX: CCX), Cape Range Resources (ASX: CAG), Quattro Plus Real Estate (ASX: QPRDC) and Advance Nanotek (ASX: ANO).