Martin Scorsese’s recent blockbuster, The Wolf of Wall Street, will no doubt have investors wondering how they too can make an exorbitant amount of money in the stock market.
Jordon Belfort (Leonardo DiCaprio) and his team did it by making a hefty commission (among other things) on “pink sheets”. That is, with stocks investors hadn’t yet heard of but promised potentially huge payouts to shareholders. It’s safe to say, the clients weren’t getting as rich as they’d hoped.
Reality is here to stay
Many financial advisors should tell you to limit your speculative punts not increase them. And for good reason.
In times of economic duress, the speculative companies are usually the first to encounter large amounts of volatility and the share price will bear the brunt of soured investor sentiment.
However there could still be a number of promising small-cap companies which could be worthy of speculation throughout the remainder of 2014. The first of which is one of 2013’s star performers: Admedus FPO (ASX: AHZ).
Admedus is a small-cap biotechnology stock which has soared over 600% in just over 14 months. It manufactures and distributes innovative CardioCel technology. Currently CardioCel uses a patch to help regenerate cardiovascular tissue but could have wider reaching applications in the future. The technology has been approved for sale in Europe and the company has been busily increasing its manufacturing capacity in anticipation of further sales throughout the world.
Another star performer of 2013 was Nearmap Ltd (ASX: NEA), climbing 710% in just 12 months. Nearmap recently achieved its maiden profit on the back of increased uptake of its geospatial map technology which boasts frequently updated high resolution images.
It provides a similar service to Google Maps except image updates are more frequent and extremely accurate. To around 7.5 cm resolution in major cities. Despite taking years to reach a profit, it has no long-term debt and the total number of shares on offer has not increased to fund new projects.
Perhaps the riskiest of all these companies is Liquefied Natural Gas Ltd (ASX: LNG). It’s a small gas explorer and potential producer with its flagship Magnolia project located in Louisiana, USA. Once operational it has the potential to produce and ship eight million tonnes per annum. Management have been fast tracking approvals to export its product from the US, teeing-up engineering contracts and seeking additional capital.
Lastly, HUB24 (ASX: HUB) is a small-cap diversified financial stock. Focused on delivering a superior technology platform capable of handling retail investors, corporates and advisors’ finances all in one place. It has two platforms, namely HUB24 Invest and HUB24 Super. The former allows investors to be the beneficial owner of all of their securities in one account. Investors have access to over 70 managed funds, but maintain full ownership of the underlying security and, thanks to the diverse offering, investors can minimises tax liabilities when switching accounts.
The super account allows you to invest in insurance, managed funds, stock markets, cash and term deposits all from one account. It combines all the areas of personal finance you’d want and means your accountant is likely to spend less time scouring through bank statements and brokerage accounts to determine your fund’s liability. HUB24’s technology is award-winning and can be found in the app-store. From an investor’s perspective, HUB24 has no debt but is yet to make a profit.
Investors who wish to build wealth in the long-term should focus on finding established businesses with healthy profit margins and growing dividend payouts. These four companies are each at different stages of developing their businesses but should be considered high-risk investments.
Motley Fool Contributor Owen Raszkiewicz owns shares in Admedus and LNG Limited.
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