Alex's No. 1 Sector of the Year

If you don't take Alex's advice about the best sector to invest in 2023, get ready for him to say "I told you so" later this year. SPECIAL OPPORTUNITIES [The Oxford Club Special Opportunities]( The Source of the Biggest Gains in 2023 Alexander Green, Chief Investment Strategist, The Oxford Club [Alexander Green] Despite the significant rally we've seen in the market, most sectors - with the exception of energy - are still down sharply. Some equity classes have fared worse than others. Yet one class, in particular, is likely to seriously outperform moving forward. It offers the best opportunities in the market right now, in my view. Let's start with a bit of background... In a bear market, large cap stocks hold up better than midcaps. Midcaps hold up better than small caps. And small caps hold up better than microcaps, the smallest of small cap stocks. However, history also shows that when the market lifts off in earnest, midcaps outperform large caps, small caps outperform midcaps, and microcaps outperform small caps. In other words, the whole process reverses. Microcaps are the most volatile class of stocks. They are also the most profitable in a rising market. As you can see in the chart below, microcaps outperform everything else over the long haul. [Chart: Microcaps Over Everything]( It isn't very close: $1,000 invested in large caps a century ago is worth $12.3 million. The same amount invested in small caps is worth $38.5 million. And $1,000 invested in a diversified portfolio of microcaps is worth $67.8 million. The trade-off for this $55 million in outperformance is - you guessed it - greater volatility. This is especially true of those microcap companies that are not yet profitable. But pre-profit is not the same as pre-revenue. I have never recommended a microcap that doesn't already have substantial sales growth. Those microcap firms that have not yet turned the corner on profitability saw their shares suffer the most in 2022. It's not hard to see why. Companies that are unable to support their growth with their own cash flows must tap stock and bond markets periodically to raise fresh capital. But interest rates are a lot higher than they were at the beginning of 2022. And it's harder to complete a secondary stock offering in a down market. Plus, low share prices make raising capital more expensive. More dilutive. Here's an example. Let's say a company has 5 million shares outstanding at $20 a share... or a market cap of $100 million. If the company needs to raise $20 million, it can issue 1 million new shares at $20. That would dilute existing shareholders by 20%, since there would then be 6 million shares outstanding instead of 5 million. But look what happens if the share price declines to $5. To raise $20 million, it now must issue 4 million new shares. That would take the total number of shares outstanding to 9 million, a far greater dilution. That's a big reason why small, unprofitable companies get such a haircut in a down market. But here's the good news... For starters, this reality is already reflected in share prices. It's a big reason why microcap stocks are down so much. It's also important to remember that many of the market's biggest gainers over the past few decades - companies like Amazon (Nasdaq: AMZN), Tesla (Nasdaq: TSLA) and Netflix (Nasdaq: NFLX) - saw their biggest gains before they ever earned their first dollar. Investors could see that blockbuster sales growth would eventually turn into powerful earnings growth. And so they bid the shares up in anticipation of big profits down the road. I expect the same thing to happen this year, as microcaps with double- and triple-digit sales growth - but no profits yet - bounce back in a big way and turn in a bravura performance. Unfortunately, most equity investors have a strong tendency to believe that what they should have done in the past is what they ought to do now. In other words, if large cap value stocks held up best in 2022, that's where they believe they should put fresh money to work this year. Large caps and midcaps should do fine this year. But not nearly as well as microcaps. That's why it makes sense to position yourself for the turnaround that lies ahead. In fact, [I've personally already done just that](. To learn more about the fantastic upside potential of microcap stocks, just [go here](. And please excuse me when I say "I told you so" later this year. Good investing, Alex OPPORTUNITIES FROM FRIENDS OF THE CLUB - [The "Overnight Drift": The Highly Profitable Market Phenomenon Wall Street Has Hidden Since 1993 Revealed Here]( - [Marc Lichtenfeld Called the 2022 Boom in Oil Stocks... Now He Says Something Even Bigger Is Coming. Click Here to Find Out More.]( - [Alexander Green Was an Early Investor in Amazon, Netflix and Apple Before They Soared 6,300%, 20,400% and 94,000%. Now He Says One Under-$10 Stock Could Follow in Their Footsteps. (Get Details.)]( SPONSORED [Bad News - Good News]( One $8 Stock Could Help Put You on the Right Side of This Equation. [Click Here for Details]( [The Oxford Club] You are receiving this email because you subscribed to Oxford Club Special Opportunities. Oxford Club Special Opportunities is published by The Oxford Club. Questions? Check out our [FAQs](. Trying to reach us? [Contact us here.]( Please do not reply to this email as it goes to an unmonitored inbox. [Privacy Policy]( | [Whitelist Oxford Club Special Opportunities]( | [Unsubscribe]( © 2023 The Oxford Club, LLC All Rights Reserved The Oxford Club | [105 West Monument Street](#) | [Baltimore, MD 21201](#) North America: [1.800.589.3430](#) | International: [+1.443.353.4334](#) | Fax: [1.410.329.1923](#) [Oxfordclub.com]( Your Legal Questions... Answered What is The Oxford Club? The Oxford Club is a financial publisher with a highly rated track record. We deliver unique and well-researched financial and investment ideas to our Members. What do you do? We share our team of experts' industry knowledge and timely insights with our Members so they have the financial literacy and tools needed to build a rich, fulfilling life. We do not provide any personalized financial advice or advocate the purchase or sale of any security or investment for any specific individual. Instead, the information we share is directed toward a larger audience of all subscribed Members. So you'll make me rich? Maybe! But not exactly. Our goal is to provide the research and information required to help you make you rich. Investment markets have inherent risks, and we can't guarantee future profits. Why should I trust you? We offer information based on what we think will provide the most value to our Members. Our business depends on Members' interest in our ideas and satisfaction with their results. We've been around for 30-plus years because our Members have continually chosen to stay with us (many of them for life). Nothing published by The Oxford Club should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed personalized investment advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after publication before trading on a recommendation. Should I still consult my investment advisor? Any investments recommended by The Oxford Club should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.