Dear Fellow Investor,

I know what you want.

You want to learn about fast-growing companies before they’re discovered by everyone else.

You want to understand why these companies are going to keep on growing for years to come.

You want to buy the stocks of these companies when they’re still in the single digits.

And you want to hold them for years, while they double, triple and more.

This may sound easy, but for most investors it’s devilishly difficult … and I’ll tell you why.

First, most investors have trouble thinking differently from everyone else. Outside of the investing world, it pays to be a conformist.

Second, most people just don’t have the time and/or discipline to do the research. They buy on cocktail party tips instead of on thorough research.

Third, and perhaps most important, most people lack conviction; they don’t know how to hold a winning stock patiently. Instead, they take small profits and move on.

Subscribers to Cabot Small-Cap Confidential have an advantage. They read about tomorrow’s winners first, when they’re still small and unknown. They buy when prices are low. And then they hold on … with the tenacity and patience of a dog with a fresh bone.

If I told you this style of investing was easy, I’d be lying. It’s hard; that’s why so few people can do it. But subscribers to Cabot Small-Cap Confidential are lucky. They get to follow the advice of editor Thomas Garrity.

Who’s Tom Garrity, or more importantly, what has he done?

He discovered Hansen Natural, for one, way before most investors. Our popular Cabot Top Ten Report first identified this as a strong stock in May 2004, when it was selling at a split-adjusted 3.13. If you bought then and held on, your profit would have been more than 1,000%.

But Tom invested in the stock three months earlier, in February, when Hansen was selling at a split-adjusted 1.71. His profit as of February 29, 2008, when he sold some of his position, was a mind-boggling 2,338%.

A lucky fluke? Not at all.

Tom also bought Halozyme, a small pharmaceutical company, in July of 2006—back when it was selling at 2.74. Halozyme’s recombinant form of the human hyaluronidase enzyme is especially useful in helping drugs transit the extracellular matrix, making it an attractive alternative to imprecise intravenous delivery technology. The little company is partnering with giants Roche and Baxter, and promising far more in the future. As of April 2009, the stock was up more than 100%.

I’ll give you more examples later on, but first I want to tell you about Tom.

In short, Thomas E. Garrity is a research junkie. He’s able to get these amazing results because he does research with a thoroughness most of us are incapable of. And he enjoys it! But achieving this independence took time.

Tom began his career on Wall Street—like so many other investors—by getting a degree in finance and then a Security Analyst License. And that got him a job with a major brokerage. Once there, Tom worked diligently while abiding by his personal set of cardinal rules. One: Never sell a client an investment he wouldn’t position his own parents in. Two: Never invest in a stock without speaking with the principals of the company.

He spent weekends doing his own stock research, and during the week, he spent hours interviewing principals of the interesting companies he had identified. But his brokerage firm had its own research department, and eventually Tom was asked to give up his research in favor of promoting the firm’s own research.

Unwilling to compromise, Tom moved on to a venture capital firm specializing in raising money for technology and medical companies.

Once in the venture capital world, Tom took advantage of the knowledge of many of his former brokerage clients—many of them leaders in both the technology and medical fields. He learned to identify the key factors that make a business succeed … or fail. And he continued to refine his powerful interviewing skills, gaining the ability to determine how well a business was doing by gauging the principal’s mannerisms on the phone.

Before long, he was using these talents to grow his own investment portfolio. And since 2000, he’s been on his own, making a very comfortable living from his investments.

Here’s Tom’s track record (as of July, 2009):

Portfolio 1 – 234% compounded return over 5.5 years.

Portfolio 2 – 319% compounded return over 10.5 years.

Furthermore, Tom has participated in the Marketocracy Investment Challenge for more than six years, and his select portfolio has earned a compounded return of 406.6%.

Tom Garrity fishes in a pond where most institutions don’t go—the small-cap pond. For the past 80 years, you see, small-cap stocks have achieved some of the highest returns of any stock group or asset class. Yet most of these stocks have no institutional coverage.

Why? Because most institutions have so much money that they need to invest in big companies to use it all. (There’s also the fact that’s it’s easier for analysts to walk where another analyst has walked before … there’s safety in numbers.) The result is that small companies are woefully under-researched. Under-researched, of course, often means undervalued, and Tom views this inefficiency as one of his primary means of generating oversize returns.

Consider, for example, one of the stocks Tom is currently recommending. This company manufactures adapter cards that interface with and manage the essential communications between servers and the networks they’re connected to. To most people, this is a boring piece of equipment. But Tom is enthused about two facts. First, that you’ll find one of these adapters at every node or connection between a server and the network. And second, that the number of wide area network (WAN) optimization units produced during the next few years is projected to grow 10-fold.

He says, “Information is the most prized asset of any business. Finding that informational edge is my trademark for successful small-cap investing.” But he doesn’t buy just any under-researched stock.

He likes to buy the stocks of companies that are pioneers in their industry niche. In ideal cases, these young companies are providing the essential tools that enable a whole new industry to grow.

And he likes to buy right. He says, “To this day, I only make investments where the odds of winning significantly outweigh the risk of losing. Whereas most investors determine the upside potential in a stock before investing, I selectively balance the risk of the investment first.”

Like most great investors, Tom attributes his success to a set of carefully developed rules. Here they are, in Tom’s own words.

1) Look for a compelling reason for stock ownership. In short, out of thousands of possible investment candidates what is it about a company that will attract mutual funds, hedge funds and pensions alike to invest in a single company?

2) Look for small companies that target shares of very large burgeoning markets. When you invest in markets of considerable size you almost immediately reduce your risk profile and stage your investment for potential enormous gains.

3) Build your position early in the stock … before the institutions arrive.

4) Good stock picking is analogous to good poker skills. Your objective should be to get as many face cards as possible to win the game. Company revenue is one face card, top-line sales is another, earnings another, thematic investment idea another, barriers of entry another, etc.

5) Invest for both value and growth. I like significant growth in sales, combined with a great disparity between a company’s market potential and its price to sales multiple.

6) Invest like you’re shopping at a warehouse store. Buy cheap, and buy in bulk. Very few stocks meet my high standards and qualify as investment candidates, so when I find one, I buy a lot of it.

7) Finally, stay educated and up to date on the companies you own. Diligence is dynamic.

By following these rules. Tom typically buys stocks before they’ve started their up-moves. That often means he has to wait a while to realize the fruits of his research. But the wait is worth it!

Because the long-term result is winners like these:

Bolt Technology (BOLT) – Bought 10/25/04 at 2.82. Up more than 300% as of mid-June.

VASCO Data Security (VDSI) – Bought 9/8/04 at 1.96. Up a huge 250% as of mid-June.

Versant (VSNT) – Bought 12/9/05 at 5.17. Up nearly 200% as of mid-June.

Even more recently, two of Tom’s top-rated stocks have climbed a whopping 150% since they were recommended!

Part of these great gains reflects fundamental progress at the companies themselves, but part of it has come because Wall Street has slowly become aware of these companies and initiated coverage.

In a nutshell: When Tom finds these companies, they’re often low-priced and they’re often thinly traded. But as Wall Street takes notice, trading volume rises, and prices rise, too!

Moral: There’s great value in distancing yourself from Wall Street, especially if it means you can buy a stock earlier and cheaper.

Says Tom, “I’m never in competition with the movers and shakers of the street. I like to keep my work under wraps. The less noise you make about your investment themes and ideas, the longer you can exploit the mastery of your investment plan.”

Which brings me to a unique feature of Cabot Small-Cap Confidential: Its circulation is limited to just 500 subscribers.

That’s a small number for us. I could sell thousands of subscriptions to this service. But if I set hordes of investors pushing around the stocks Tom has so diligently uncovered, their buy orders would just push the stock prices up … temporarily. And I want you to buy these stocks when they’re cheap! So I limit the publication’s circulation.

An introductory packet including a Special Report, “Tom Garrity's 10 Rules for Small-Cap Investing,” and a guide to how you can best use the advice.

A thorough fundamental analysis of one stock on the first Friday of every month. This includes an overview of the industry, an examination of the company's main product or service, an analysis of the competition, a recommended buy range and more.

An email update—every Friday—that reviews all of Tom’s current stock recommendations. Plus Email Bulletins anytime Tom learns of news that will affect his stocks.

Access to the subscriber-only website that you can check from anywhere in the world, at any time.

The ability to email Tom Garrity himself at any time if you have any further questions about his recommendations. (That alone may be worth the price of the whole package!)

If you think you are truly ready for this service—it takes an independent mind, and it takes patience—then I urge you to act now. The market’s recent volatility has shaken out some investors and we have a few openings for new subscribers. But most good stocks have turned around and begun new uptrends with major upside potential, making this an excellent time to subscribe.

To sign up now, simply click here.

Cordially,

Timothy Lutts

Publisher

P.S. Many investors in small stocks buy late and sell early … a recipe for failure. With Thomas Garrity as your guide, you’ll do the opposite … and you’ll be a big winner. Join him today!