Finding the next a2 Milk is no easy task; there’s no sure-fire way of identifying which stock will go up 500%+. However, each year there are a number of small caps that at least double, and these stocks have some defining features that investors can look for.

1. Earnings growing strongly
2. Upgrades coming through
3. Not well covered by brokers

When all these conditions are met, it’s not uncommon to see a ‘PE re-rating’ that can send the share price up, explains Todd Guyot from the Regal Australian Small Companies Fund.

“At the small end of the market, you can find stocks that can give you significant outperformance in a 12-month period. That’s harder to find at the big end of town.”

In this video, Guyot discusses two recent examples, and shares some valuable insights into his process.

Further insights

The Australian Small Companies Fund seeks to apply Regal’s long/short investing ability to provide attractive returns relative the S&P Small Ordinaries Accumulation Index. Find out more