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These Stocks Rise Faster Than Any Other Investment Class in the WorldBy
Monday, June 8, 2009
Late last year, as the markets continued to plummet, I began taking a very close look at a certain sector of the market. The simple fact is, at the end of every major market downturn, this sector rises higher and faster than any other investment class in the world...
Old-time market pros regard the 1973 to 1974 bear market as the most savage bear market since the Great Depression... and the bear market that most closely resembles the bear market of 2008. Check out how this group of stocks performed once the 1974 bear market ended...
Last year, we experienced the worst stock-market panic anyone under the age of 80 has ever seen. By March 2009, the S&P 500 was down 58% from its high. So I figured, if a new bull market was coming, this one sector would be the place for the largest gains in the stock market. The sector I'm referring to is penny stocks... On Wall Street, brokers and analysts judge the size of a company by its "market cap." Generally speaking, brokers call any company with a market cap less than $1 billion a "small-cap stock" and any company with a market cap less than $250 million a "micro-cap stock." In the past, these small-cap stocks often traded for less than a dollar per share, so you also might hear them called "penny stocks," even though very few stocks actually trade for pennies. If you're serious about making a fast fortune in the stock market, you should only ever buy these penny stocks... Firstly, you're never going to make outrageous gains in a short amount of time trading large-capitalization stocks. Take Coca-Cola or McDonald's, for example. These are large-cap stocks. They're mature businesses. And stocks likes these might make incredible long-term investments... But for big, fast trades, these "blue chips" won't work... Even if they do exceptionally well one or two years out, the trader might, at best – at very best with the best timing – stand to double his money over a few years. On the other hand, penny stocks are tiny companies, and small improvements in their business or in their market can result in huge gains in the company's profits and stock price. The second reason is equally important. Bargains don't often exist with big stocks because PhDs and MBAs and Wall Street analysts pick over them every single day. So you usually don't get the market "inefficiencies" that you get in the small-cap markets... You see, big-money institutions – fund managers, hedge funds, pension funds, insurance funds – can't buy penny stocks. They're too small. So analysts don't look at penny stocks. They don't publish research on them. That makes the market inefficient. And as a small investor, you can take advantage of these inefficiencies, essentially finding bargains. Finally, as you can see from the table above, in bull markets, penny stocks rise faster than any other stock market class. So you get the most performance out of limited capital. The S&P 500 has risen 42% since March 6. The Russell 2000, an index of small-cap stocks, is up 55% over the same period. If this rally marks the beginning of a new bull market – which many smart analysts I follow think it does – then penny stocks will be the best place in the world to put your money over the next few years... Good investing, Tom P.S. I've recently launched a penny stock trading service with DailyWealtheditor in chief Brian Hunt. We're helping our readers capture the huge moves we're seeing in the penny stock markets right now. We've already scored two doubles... and 11 of our 13 picks are winners. To learn more aboutPenny Trends – and how DailyWealth readers can claim a 55% discount –click here.
Further Reading:
Traders Take Note: These 'Risky' Stocks Are Dominating Market Notes
NEW HIGHS OF NOTE LAST WEEK
MFA Financial (MFA)... mortgage REIT Hatteras Financial (HTS)... mortgage REIT Anworth Mortgage (ANH)... mortgage REIT Capstone Mortgage (CMO)... mortgage REIT Texas Roadhouse (TXRH)... restaurants P.F. Chang's China Bistro (PFCB)... restaurants NuStar Energy (NS)... pipelines Williams Pipeline (WMZ)... pipelines Coeur d'Alene (CDE)... gold & silver IAMGOLD (AU)... gold stock AngloGold (AG)... gold stock Gold Fields (GFI)... gold stock Randgold (GOLD)... gold stock Seabridge Gold (SA)... gold stock KongZhong (KONG)... Chinese media Netease (NTES)... Chinese video games Changyou (CYOU)... Chinese video games Shanda Interactive (SNDA)... Chinese video games Caribou Coffee (CBOU)... coffee Diedrich Coffee (DDRX)... coffee Green Mountain Coffee (GMCR)... coffee
NEW LOWS OF NOTE LAST WEEK
Cattle ETF (COW)... a downtrend in beef |
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