Small cap stocks are regularly priced inefficiently because 1) Wall Street analysts no longer cover these names very much if at all, and 2) fund managers stay away because they don’t want to do the work, or they are wary of the risks.
My unique system of stock analysis has a field day finding mispriced stocks in this end of the market that produce huge profits. That’s why my under $10 stocks have handily beaten the market in each of the past four years. (Click here for performance.)
I find underpriced names with great potential by looking for a blend of growth opportunities, relatively cheap valuation, financial strength, opportune sentiment extremes, and the right ownership dynamic.
Here’s another reason why low priced stocks can be big winners compared to large cap names. Large caps are already so big it’s tougher for them to produce enormous gains. It’s easier for a $4 stock to double and go to $8, than it is for an $80 stock to go to $160.
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