There was a good article in this weeks Investors Chronicle (31/12/2015) by ShareSoc Director Mark Lauber on how to weed out those small cap companies that will prove to be disappointing investments. Here’s one quote from it:
“If you don’t mind throwing some babies out with the bathwater, just eliminate all resource stocks and all foreign stocks from your AIM portfolio – you’ll protect yourself from a lot of losses with this simple step.”
He mentions one resource company he invested in that was trading below its cash balance but “it didn’t take long, however, for that cash to follow management’s ambitions down a series of speculative undertakings, taking my investment with it”.
He has clearly learned a lot from experience.