Special Feature
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Small cap companies that develop ground breaking technology.
This is also fertile hunting ground for potentially very material capital gains and essentially involves hunting for ‘the next big thing’. A prime example here is that of video search company Blinkx. Take a look at the chart below that shows what happened to this stock just before it took off in June 2010. From hovering around 10p for months the stock went near vertical and hit 100p before the year was out as the company began to gain traction with a variety of partnership agreements. The classic ingredients here were - a ‘sexy’ tech story, tightly held stock, increasing institutional interest and a buoyant market background.
Blinkx chart Another key ingredient in this example was that management held a good percentage of the stock in the company - always a good sign as it means they are completely aligned with you. The last thing you want to be involved with in a supposed ‘game changing’ tech company, in particular, is one where management have next to no stake. The prime example of this is the story of Synchronica where the CEO continually raised money from investors who backed his vision, but he himself had a less than nominal stake.
10 | www.financial-spread-betting.com | July 2012
The other lesson with Blinks is that a cursory look through the holding announcements in 2010 into 2011 detailed increasing stakes being taken by respected institutions such as Black Rock - this is always a good sign as it shows that the mainstream investors believe in the ‘story’ and so add extra buying pressure along the way.