To Create Jobs, The Stock Market Needs A Little Inefficiency

Active stock pickers can now beat the market





Consider: The average small cap company has only two research analysts, compared with 12 for large caps. Fully 29% of small caps have no analyst coverage (vs. 1% for larger caps). Small cap average daily trading volumes as a percentage of total stock float the best proxy for a stock's liquidity are 40% less than that of large caps. As a result, institutional investors comprise only 27% of small cap shareholders, compared with 81% for larger caps.









And yet for contrarians, and they are usually the people who make money in the stock market, that is surely also the moment to start backing active management again or else picking stocks yourself. As the trackers and ETFs take over, it will be possible to beat the market, and probably fairly easy. Why? Because the index funds will be buying blindly, ignoring the obvious winners and losers, and anyone who uses just a modicum of common sense should find that creates lots home page of opportunities.