Three Reasons to Own Mini-Blue Chips Now

TRANSCRIPT

Many companies worth less than $3 billion are of blue-chip quality, but because of their smaller size, they get ignored by mainstream portfolio managers.

We think that’s a big mistake and now is the time to own mini-blue chips.

Here are three reasons why:

First, mini-blue chips are undervalued compared to their historic prices and to larger companies.

Giant tech stocks have dominated the market for so long, there’s now a historic opportunity to buy mini-blue chips at deep discounts.

Second, mini-blue chips are primed to outperform.

When interest rates fall, smaller companies can disproportionately benefit.

And, as they grow their earnings higher and faster than the market, we could be very close to a tipping point for mini-blue chips.

Finally, mini-blue chips often get acquired at big premiums.

Even if the market doesn’t value them fairly, their competitors will.

In the first half of 2024, seven smaller Canadian companies were taken out by their larger peers at an average price of 39.4% over market value.

Not a bad return if you ask me.

Our advice is to allocate up to 25% of your Canadian equity purchases to NCM Small Companies Class or NCM Income Growth Class.

You’ll get access to mini-blue chips that you won’t find in most other funds.

And that means better diversification and, in my opinion, very attractive return opportunities.