The journey from contrarian to consensus seems to be getting accelerated in a market running dry on investment opportunities. Just a media event, a brokerage report or investment webinar are sufficient to grab heightened investor attention. The viral spread of investment ideas in social media is at an all-time high.
Everybody is intensely experiencing idea anxiety. The churn in portfolios is also seeing a rise among newer market participants. To fit in a new idea, investors are selling out of older ones. All this is seeing another trend take shape.
The portfolio quality which investors created to overcome the market shock of 2020 is gradually getting diluted. The rate of dilution of portfolio quality seems to be rising. Investors are shifting to smaller-sized companies to raise portfolio returns. This is leading to investor crowding in microcaps. We probably are setting ourselves up for a late rally in small-sized companies outside of the mutual fund industry’s stock universe.
While many microcaps are still offering value, there is the worry of poor governance and inadequate disclosure in many. Promoters could use higher valuations to raise capital. Churn is now the order of the day.
