Where is the Value?

A friend had commented recently to me that STI had moved up too fast during this short period of time and therefore, he decided to get out of the market as blue chips are now fully valued. According to him, he does not wish to consider mid/small cap stocks as they are risky.

I did try to change his way of thinking but he decided not to heed my advice.

The above is just one extreme. The other extreme is a group of punters who buy/sell small/mid cap stocks everyday for price movements.

I do not wish to be in any of the above two groups of extreme investors.

Of course, I agreed with my friend that STI is not undervalued anymore. The easy money had already been made. But that doesn't mean that one should not buy any more stocks. The value is now in the mid/small cap segment of the market, and that is where I had been adding recently.

As a value investor, your scope of knowledge in the market should not be restricted to only big cap stocks. You should have a wide range of companies under your radar, which also include many small/mid cap names. Companies in the small/mid cap segment are not necessary risky stocks, it really depends on your margin of safety when you purchased it and also using the diversification strategy to reduce single company risk at any one time.

Make no mistake. The value is now in the small/mid cap segment of the market. Pick the correct stocks and you should be rewarded if you are patient enough for Mr Market to re-rate them. Meanwhile, you will be rewarded with dividend from your holdings.