Hedge Funds and Small and Micro Cap Stocks

Hedge funds which seek to get absolute returns regardless of how the stock market is faring, often look for opportunities in very small companies, from the micro cap penny stock (capitalization less than 500 million) to the small cap stock (capitalization up to 2 billion). Because of the smaller cap involved in these stocks, hedge funds can take a significant stake in the company rather easily.
Since hedge funds often tend to trade in and out of these positions for short term profits, it is a good strategy for an individual investor to piggyback on these huge trades. That is, if the individual investor can determine when a hedge fund is starting to build a position in a micro cap or small cap stock, he or she can do the same, and exit when there is an indication that the hedge fund is initiating to unload its position.
While the above strategy can yield fantastic results, it is not easy to spot these trades, because a hedge fund (or a good one, at any rate) does not execute the buy or sell of the micro cap stock in one day. Rather, a hedge fund starts to slowly build its position and having built it unloads it gradually, therefore it does not leave a trail of sudden surges in volume.
So where can an individual investor find this information. There are many online sources that track this information. Usually this information is sent to them via a penny stock newsletter that has micro cap stock alerts. One good place to start exploring this is at www.hypergrowthstock.com. This is a newsletter that has consistently outperformed its peers through spotting such short-term trades and also picking long term winners in the micro cap stock universe.
Remember, though, as an individual investor it is essential to pay attention to the penny stock newsletter's stock alert that indicates a sell on a previous buy. If they buy of the penny stock was based on spotting a hedge fund trade, never get attached to the fundamental story of the small cap company because its price has not surged by triple digits based on fundamentals and as soon as the hedge fund exits the gains will vanish.