How Do You Find an Invisible Star?

Today I want to reveal something about Motion Trader

It’s a special feature that could put you ahead of many professionals.

As you know, Motion Trader has wide coverage. Its algorithms crunch the numbers on practically every company on the ASX.

And just to be clear, I don’t just mean the big names of the ASX 200.

I’m talking about over 2,000 stock listings. The vast majority of these aren’t even in the All Ordinaries. That leaves a lot of potential outside the main benchmark.

Now, think for a minute about managed funds. Many local managers focus on the big end of the market. Even those with a smaller focus typically have limits on size.

Take the ASX Small Ordinaries for example…

It represents all the companies in the ASX 300, but excludes those in the ASX 100. Fund managers use this as the benchmark for small cap local equity portfolios.

But remember, the ASX has over 2,000 listings.

The Small Ordinaries only goes as far as the 300th company. That leaves most stocks without much (if any) analyst coverage. It’s as if they don’t exist.

You’re about to see something amazing… I’m going to show you the potential benefit of analysing companies beyond the main indices. I call these stocks “invisible stars”.

And to make this even more interesting, I’m not going to give you hypothetical examples. You’ll see actual trades from my own portfolio. Yes, these trades are the real deal.

Okay, so let’s roll into it…

The first example is Bravura Solutions Ltd [ASX:BVS]:I want you to start by looking at the blue circle. This is a key area on the chart. It’s the point where Standard & Poors announced that BVS would be entering the ASX 200.

Now, entering the ASX 200 is a big deal. This is when a company comes to the attention of many traders and investors. The mainstream media also pays more attention.

Other notable indices include the ASX 50, ASX 100, ASX 300, and the All Ordinaries.

ASX 200 inclusion often open the door to more investment dollars. This is because many funds can’t buy shares in companies outside the index.

You could say that entering the top 200 is the ASX equivalent of “getting made”.

Now, getting back to the chart for BVS…

My entry point was at $2.75 on 21 March 2018. This was 204 days before the stock’s ASX 200 inclusion. By the time of the announcement, my holding was up 38.5%.

Look at it another way…

By following Motion Trader’s entry algorithm, I effectively got an “early-bird” discount. ASX 200 watchers, on the other hand, had to pay a lot more to buy a stake.

Many fund managers (or stockbrokers) don’t look far beyond the top 200 companies. They may not have an investment mandate for smaller stocks, or simply lack the resources.

Motion Trader doesn’t have these limitations. Its algorithms were able to identify an opportunity in BVS well before it came to the attention of many investors.

Here’s another example:Motion Trader’s algorithms were onto this one early. I suspect few people knew of lithium miner Kidman Resources Ltd [ASX:KDR] at the time I got my entry signal.

Standard & Poors announced KDR’s inclusion in the ASX 200 on 8 June 2018. But the horse had well and truly bolted. The shares were already 287% above my entry price.

Also notice how the algorithms let my profits run. They calculate a trailing stop for all my trades (see the red line below the share price), and this led to a big gain.

In this case, all the gains were made prior to index inclusion. KDR began a deep consolidation just after the announcement. Buying on the news doesn’t always pay-off.

And this isn’t unusual…

You see, the “smart money” is often a few steps ahead of the mainstream. And it’s the activity of these savvy players that Motion Trader’s algorithms aim to detect.

Flickering lights

Okay, let’s expand our search zone…

This takes us outside the reach of the ASX Small Ordinaries Index.

It’s like leaving the inner Solar System and travelling to the outer planets. Next stop is a group of companies where research can be hard to find… if it can be found at all.

Here’s the first outlying stock: Jumbo Interactive Ltd [ASX:JIN] is a digital retailer of government and charitable lotteries. If you don’t know its name today, just think how unknowable it was back in 2017.

But the smart money knew about JIN… and it was buying.

Now, you may be thinking JIN must have been a micro-cap business… just a small speculative play that took off… not the sort of stock you’d usually consider.

But hold on a minute…

At the time I bought my stake, JIN had a market cap of close to $170 million.

Despite its size, JIN didn’t get an ASX 300 berth until March 2019. The company’s market cap was then closing in on one billion dollars (and my shares were a lot more valuable).

Another example is Pro Medicus Ltd [ASX: PME]: PME is amongst an interesting group of stocks… large enough to qualify for the All Ordinaries (the top 500 companies), but outside the ASX 300.

Many people don’t have this group on their radar. While the companies are large businesses by everyday standards, they lack the market presence of the big names.

But a big profile isn’t necessary for Motion Trader’s algorithms…

You see, their job is to detected share price movement. They do this by analysing the price data after the market close each day. And this can uncover some amazing finds.

PME is a case in point. I bought a stake on 12 October 2015 — more than two years before its ASX 300 inclusion. I made a 93.8% gain in a stock that few people knew about.

The key was finding PME amongst more than 2,000 stocks.

And thanks to a set of motion sensing algorithms, this wasn’t a problem.

The final frontier

So what about outside the All Ordinaries index?

And to be clear, we’re talking about stocks that don’t make up the top 500. This is the ASX equivalent to crossing into the darkness of deep space.

Coverage beyond the top 500 is largely non-existent. Yet you could find some highly profitable opportunities in the furthest reaches of the market.

Check this out: Alliance Aviation Services Ltd [ASX: AQZ] is an air charter business. It operates in Australasia and Europe, and has a fleet of small jet and turboprop aircraft.

So how do you find a stock like AQZ?

With an algorithm, of course.

My entry was 283 days prior to AQZ’s inclusion in the All Ordinaries. By the time Standard & Poors made the announcement, I was already ahead by 94.8%.

There’s almost no way I would have found a stock like this on my own. Even if I went through the charts one-by-one, I’d unlikely dig deep enough to find AQZ.

Opportunity like this often require an algorithm’s help. And if you have the ability to use algorithms, you could have a huge advantage over those who don’t.

Okay, there’s one more example I want to show you. It’s another stock that Motion Trader’s algorithms found in the darkness of the smaller ASX listing.

Have a look at this: Advanced NanoTek Ltd [ASX:ANO] was virtually unknowable… a small company on the fringes of the broader market. I’m sure few stockbrokers would have even heard the name.

But this needn’t be a problem… Motion Trader’s algorithms are a motion detector. They don’t need broker reports. They just need the price data.

You see, even small stocks make ripples when they move. And Motion Trader’s algorithms can pinpoint the faintest price shifts. They could then bring these to your attention.

Advanced NanoTek is just one example… there are many more.

My stake in ANO was up 300% in the first four month. Not a bad return from a stock that wasn’t even in the All Ordinaries. The smart money leads the way, again.

Now, an important point…

The stocks you’ve seen are some of my best performers. There are also plenty trades that didn’t do as well. Many stocks even lost money.

My strategy is to build a portfolio of relatively small trades, not a few big ones. It’s all about increasing the odds of buying stocks like you’ve seen above.

The “secret” behind these trades is straightforward…

The algorithms identify trends with upside potential. They then apply strategies to help manage risk. The aim is to let profits run, and cut losses relatively early.

Think of it like this: A child’s height increases as they grow. Business is similar. Shares in smaller companies typically trend higher as they get bigger… it’s the nature of growing.

Looking beyond the big ASX names can be highly profitable. The key is to have the right algorithms working for you. That’s something many people don’t have.

The ASX is just like space… there’s a lot going on outside the big names.

Motion Trader is here to give you an eye towards the stars.

All the best,

A NOTE FROM MARK MY LAWYER: The material on this website is general in nature. It does not constitute personal investment advice or personal trading advice. Any advice provided is general advice only and does not take into account an individual’s risk profile or financial situation. Trading involves the risk of loss as well as the potential of profit. You should seek independent financial advice in deciding if trading is appropriate for you. As always, past performance is not indicative of future performance. Jason McIntosh is an Authorised Representative (AR No. 1274211) and Motion Trader Pty Ltd is a Corporate Authorised Representative (CAR No. 1274210) of Shartru Wealth Management Pty Ltd, AFSL 422409.

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