Small Cap Investing

It’s easy to buy and hold the familiar blue-chip stocks that every investor owns—Apple, Exxon, Google, etc. Small-cap investing requires you to dig a bit deeper.

It’s worth the extra effort. Small-cap investing is a chance to profit from smaller (generally $1 billion market cap or less), little-known companies just as they are hitting their growth stride. Because they have so much room still to grow, small-cap stocks present an opportunity for enormous profits.

Knowing that these diamonds in the rough aren’t easy to find, the following guidelines are helpful to keep in mind when small-cap investing:

Search for game-changers. Look for companies that are at the cutting edge of new technologies and new industries. These are typically the behind-the-scenes companies that supply a new technology or solution to the big boys. For example, when Apple comes out with a new product, you can often profit more by investing in the company that manufactured a component of the product than by investing in Apple itself.

Invest in small caps before the institutions notice. You want to invest in companies that attract the large hedge funds, mutual funds and pension funds. But you want to do it before those institutions take out a large stake. When institutional investors get involved en masse, they can quickly drive up the share price. Seek out small companies with less than 40% institutional ownership, and build your position before the institutions recognize the opportunity. Once they do take notice, shares should soar.

Look for growth and value. In small-cap investing, strong growth opportunity is the first thing to look for. But value should be next on your list. A good small-cap candidate is a young company that is undervalued based on its market potential. A clean balance sheet helps. 

These are just a few of the guiding principles that form the basis of our Cabot Small-Cap Confidential advisory. Helmed by our small-cap investing specialist Tyler Laundon, the Small-Cap Confidential service does the heavy lifting for you, identifying those hard-to-find small caps that can earn you triple-digit returns. Cabot readers have doubled their money 29 times since the company’s inception in 1970, and along the way, the Cabot Small-Cap Confidential advisory has become one of the leading technology advisories in the industry. 

Small-cap investing can be daunting on your own. Sorting through all the clutter to identify the companies that truly have a shot at becoming the next big winner seems like an overwhelming task. Let Cabot Small-Cap Confidential guide you through all the rubble.

Analysts Center

Our analysts regularly share content from their premium advisories. See a sampling of our analysts’ unique takes on current market conditions and how they impact a wide range of investments.

Small-Cap Investing, 10 Rules for Success

Chief Analyst Tyler Laundon walks you through his winning 10-rule methodology for small-cap investing.»

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