“Discovering Superior Small-Cap Stocks.” That’s the motto of our newsletter, the SmallCap Informer. Each month, we aim to deliver ideas for long-term-oriented investors who are interested in the higher growth and return potential offered by small-cap companies.
Our approach to small-cap stock selection isn’t focused entirely on growth, however. Of the thousands of small-cap stocks currently trading on U.S. markets, we seek companies that exhibit only the highest elements of quality: companies with excellent management teams, superior margins, distinct competitive advantages, and impressive comparisons to their peers.
Although we espouse a buy-and-hold strategy, that doesn’t mean buy-and-never-sell. In fact, small-cap stocks require some careful monitoring to ensure that short-term obstacles don’t become long-term debacles. That’s why we monitor all the stocks we feature in the Informer and make recommendations to look elsewhere when conditions warrant.
Our approach to small-cap stock investing is based on the single premise that a company that is able to grow its profits adequately and consistently will be rewarded, in time, with a rising stock price. Note that we specify “in time”; the correlation between a company’s growing profits and an increasing stock price is rarely as direct as most of us would like.
Over time, however, this method of investing — focusing on well-managed companies that deliver results to shareholders and — has been tested and found to be a practical method of building wealth in the market. The key is to have patience and conviction and discipline, with the wherewithal to differentiate between forces that affect “markets” and those that affect your “companies.”
Our outlook is long-term, which is to say that we look at the five-year potential for the companies we review. With a time horizon of three to five years, investors can find success with, experience shows, four out of every five individual stock picks. Of course, some companies may be sold for reasons of under-performance or overvaluations before that five-year period ends, and others may outgrow our needs by the very virtue of their success. In each issue, you will find on an overview of all past picks.
With each issue, our objective is to uncover opportunities for investing in quality small-cap stocks that are suitable for any long-term investor’s portfolio. Our editors and analysts will present two small companies for you to review and consider for your stock portfolio. Subsequently, we will follow those companies with an eye toward changing conditions that might warrant a sale of those stocks.
In selecting and analyzing stocks, we use the software tools made by our publisher, ICLUBcentral Inc., including MyStockProspector.com for stock screening and Toolkit 6 for stock analysis. In addition, we review a company’s disclosures made in press releases and in required filings with the Securities and Exchange Commissions. Our analysts dig into industry-specific factors and macroeconomic trends to provide perspective on our stock picks.
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