Thanks for a great post.We all have different investment styles,...

Thanks for a great post.

We all have different investment styles, and mine is driven by exactly the point you made - "As we all know only a small percentage of small-cap companies become successful and profitable."

One could easily buy 10 promising small-cap companies and see them all go broke. That means a defensive approach is always likely to be more rewarding than an aggressive one, yet most people are very aggressive in this part of the market. I used to be like that too, and that's when I lost money. From the outset, I'd say that 4DX could be the next CSL, but that is really hard to know. If it was easy to know the price would either be much higher or lower. So it's always a game of probabilities, and I try to stack the odds in my favour. My current view is that it is probably better to be out of the stock, because another CR is coming, and profitability is an awfully long way away.

I guess what I've learned over the years is that with small stocks they tend to drift down until they approach profitability, and that's the time to buy. Maybe you miss the first leg up by waiting in a company that is clearly winning, but it doesn't really matter. It's funny you mention CSL because I bought them, but I missed the first four or five legs up and bought them at $25. I sold out years later at $200. I was also late on another big winner WTC, but it didn't matter either (don't worry I've had plenty of losers too - see RHC for example) so the strategy is to avoid the loses so I've cash to play with when a winner emerges.

When I bought 4DX I made a mistake, in my eyes it was and is too far from profitability to be a good bet. I made a stupid decision, and was lucky to get away with it. I did better with AL3, it was much closer to profitability and growing revenue at a decent rate. I bought it about a year ago, and have now gone really hard into the stock, later buying it at higher prices. Win or lose, I've managed my risks better, and that's more likely to lead to a better result. I suppose the thing that I've learned over the years, it is that success comes more from avoiding the big losses than picking the big winners. That's not sexy but it works for me.