companies like CMND are unlikely to attract big mutuals or even big investors
I completely agree, and over the past few months have thrown in the towel with small stocks and have sold them all off, most of them losses including Command. The only small stock I am keeping is Perclose (PERC), a medical device company I am familiar with that is growing 62% per quarter over the last 4 quarters.
I used to think that if one were smart, rational and concentrated on fundamentals, one could do well in the markets. Not this market. It's all about money flow - which stocks are going to get the money?
I feel that there are 2 major sources of money flow on a given day:
(1) Day traders/momentum investors. Problem is, it's very difficult to guess where the money flows next, and when the money flows out - look out below. They were active in Y2K earlier this year. Once they left, there is no other money source, as we have all painfully felt. Not for me.
(2) Mutual funds/401k: This is the reliable, steady source of money. Problem is, they are so large, they can only buy large cap stocks. We laugh at outrageous valuations of Coke, Cisco, Gillette, but they just keep moving up and up because there is no where else for a multibillion dollar fund to go to. Plus, any stock in the SP500 is guaranteed to get constant money flowing inward as boomers dutifully fund their 401k with index and mutual funds paycheck after paycheck.
Unless something drastic happens to money flow from 401k and mutual funds, I see this pattern continuing indefinitely. Small caps have underperformed large caps since 1991. Since 1991, mutual funds have enjoyed steady, huge inflows of cash, making them the multibillion dollar behemoths they are today. These funds are just not interested in small to mid cap stocks.
Nibbled on Lucent (down 20% from highs) and MSFT (down 15% from highs) today. |
