The FTSE 100 isn’t usually a hunting ground for private traders. It certainly isn’t my usual area. These stocks are often so large that it’s hard for private investors to gain an edge over the smart money who have bigger bankrolls, bigger teams and bigger computers.
This makes sense. Whereas an entire team may be dedicated to covering the various cash flows of Vodafone’s subsidiaries, stocks that have a market capitalisation of less than £100m may only have one person covering the sector – if there is even any coverage at all.
This makes small caps more attractive, because the inefficient market means higher potential returns become easier to find. Huge investing institutions are absent, leaving smaller players in what can be an illiquid market.
But this illiquidity is a double-edged sword, and works both ways. It can make acquiring (and disposing of) a stake in a business difficult because of the lack of supply. But should
