These Stocks Can Easily Double Your Money

Believe it or not, some investors were able to boast about their 2008 stock returns.

Who are these people, you ask? Investors in these top-performing stocks of 2008:

Company

Dividend-Adjusted Percent Increase From 1/1/2008-12/31/2008

Market Capitalization on 1/1/2008

Emergent BioSolutions (NYSE: EBS  )

416.0%

$150.5 million

Star Scientific (Nasdaq: STSI  )

381.2%

$64.9 million

Crawford & Company

250.4%

$210.1 million

American Italian Pasta (Nasdaq: AIPC  )

219.1%

$129.0 million

Mexco Energy Corporation (AMEX: MXC  )

211.3%

$7.0 million

Data from Capital IQ, a division of Standard & Poor's.

Notice anything about those companies? They're small. They're very small. Now compare their performance to the top performers of the S&P 500 Index:

Company

Percent Increase From 1/1/2008-12/31/2008

Wrigley (acquired)

36.6%

Family Dollar (NYSE: FDO  )

35.6%

Anheuser-Busch (acquired)

31.0%

UST (NYSE: UST  )

26.6%

Amgen (Nasdaq: AMGN  )

24.4%

Data from Bespoke Investment Group.

While the latter is nothing to sneeze at, particularly given that the overall market dropped 37% in 2008, wouldn't you rather have the former?

Where you'll find the double-baggers
The tendency of small caps to outperform their large-cap brethren isn't just a down-market happenstance -- it held true in 2005, 2006, and 2007 as well.

In any market, the stocks with the most potential for outsized returns (stocks that are going to double, triple, or even increase your investment tenfold) are not found among large caps, but rather among stocks that are:

  1. Ignored.
  2. Obscure.
  3. Very small.

Why? Because the market's greatest inefficiencies (and, thereby, greatest opportunities) lie hidden among the investments that Wall Street analysts and institutional investors shun only because of their size.

Starting today
Investing in small-cap stocks makes many people nervous -- and today's market volatility is sending many people into the arms of stable, financially pristine large-cap stocks. Which makes now an even better time to buy up those oversold small caps.

But not all small caps are equal. You want to make sure you buy small caps that have a rock-solid balance sheet and a solid business model. Both these factors ensure that the company will be around five to 10 years from now, giving it plenty of time to double, triple, or increase tenfold in size.

At Motley Fool Hidden Gems, these are precisely the kinds of stocks we're recommending right now -- and we're putting real money behind our best ideas. Our real-money portfolio is currently up more than 2.5% in less than two months -- and one stock has already skyrocketed more than 115%!

If you'd like to see which small-cap stock has given us such amazing returns, as well as all the other stocks that have made it into our portfolio, you can find out completely free. Click here for more information.

Already subscribe to Hidden Gems? Log in here.

Adam J. Wiederman owns no shares of the companies mentioned above. The Motley Fool's disclosure policy makes sure he'd tell you if he did.


Read/Post Comments (20) | Recommend This Article (113)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 02, 2009, at 2:05 PM, automaticaev wrote:

    ya im looking for something to ad for next pullback any better ideas??

  • Report this Comment On June 02, 2009, at 4:29 PM, TaylorStroh wrote:

    Just wondering, this blog is trying to help us find small and ignored stocks that could be great, why doesnt CAPS allow us to pick those stocks, there are some that have done and i believe will do great for myself and us other CAPS players and we cannot pick stocks that are under 100M market cap. Just think this should be something to think about.

    Maybe they have changed that since I last looked.

  • Report this Comment On June 02, 2009, at 5:08 PM, yamsi wrote:

    It hasn't changed which is unfortunate. Small caps are the companies that people know the least about, and the ones which need the most communication.

  • Report this Comment On June 02, 2009, at 5:47 PM, brow0905 wrote:

    Good Points from both TaylorStroh and Yamsi. Adam what gives? It would seem these would be perfect stocks for the Caps Community to post commentary on as someone could work there or work for a competitive company and bring more knowledge of these companies to the small cap investing community. What's the fool policy there?

    Also I just want to note it's fantastic to read a commentary blog on a fool article where a bunch of clowns are complaining that they only get a sales pitch and don't get any value from the Fool.

  • Report this Comment On June 02, 2009, at 7:28 PM, stan8331 wrote:

    I agree about the need to somehow incorporate small stocks into CAPS. They are precisely the stocks where information is most needed. I can understand why there might be some concerns about people using micro-caps to distort the CAPS game, but there are alternatives to just opening CAPS up to any and all stocks.

    As an easy, small first step, I can't see where it could possibly hurt to allow non-scored pitches on all stocks that are below the market-cap limit. That could at least help get information flowing.

    Longer-term, it ought to be possible to arrange some sort of segregated competition for the micro-caps, so that those who are interested could play without distorting the main CAPS game.

  • Report this Comment On June 02, 2009, at 9:46 PM, sallanj wrote:

    These Stocks Can Easily Double Your Money.......IF I TOLD YOU WHAT THEY ARE.

    OK SO WHAT ARE THEY?

    ANOTHER DEAD END POST! HOW ABOUT THROWING A BONE ONCE IN A WHILE. YOU CAN ALWAYS DISCLAIM IT. JEEEZ

  • Report this Comment On June 02, 2009, at 11:40 PM, TMFJake wrote:

    We are very interested in launching a MicroCAPS site in the future. My position is that we would want to segregate these ratings from the core CAPS service, since the micro-cap activity could distort things in unintended ways. But we designed CAPS so that we could do just this kind of thing.

    The current market crisis may push this effort out a little, but I hope that we can do something like this in the not too distant future. In the short term, we might be able to structure a CAPS contest that supports picking microcap stocks if that would be of interest. Drop me a line if you want to advocate for this as an incremental first step (jkeeling@fool.com).

    Best,

    jk

  • Report this Comment On June 03, 2009, at 10:46 AM, GreenmanVT wrote:

    Just a small edit: UST was also acquired by Altria (or atleast a tender offer submitted in 2008 with talks happening in mid to late 08 and the deal going through on ). Interesting to note that 3 out of the 5 highest S&P 500 performers in 2008 were also aquired in 2008 (or Jan 6th in UST's case).

  • Report this Comment On June 05, 2009, at 2:36 PM, whyus wrote:

    If these stocks are so good, why doesn't the author own any of them.

  • Report this Comment On June 05, 2009, at 4:22 PM, TxTom wrote:

    This article says basically NOTHING. And we are paying for this kind of garbage?

    Even I could have said "some small cap stocks will do very well". And I don't charge a penny for the advice.

    Pitiful............

  • Report this Comment On June 05, 2009, at 4:53 PM, jbrt wrote:

    traded over $750,000.00 last year and so far his year , DOWN $91.00 been a rough year , I don't buy these , " day late and a dollar short "

  • Report this Comment On June 05, 2009, at 4:56 PM, automaticaev wrote:

    You guys have to pay to read this? It lets me read every article on this websight for free.... Even those one articles are free....

  • Report this Comment On June 05, 2009, at 7:52 PM, MartinLois wrote:

    Do you remember MATT has said this:" Clean or not, coal is still the dominant source of electricity in the U.S. and around the world, and that promises to keep coal miners like Peabody Energy (NYSE: BTU) and Arch Coal (NYSE: ACI) with plenty to do. Of course, it would be tough for Peabody or Arch to do too much of anything without the machinery made by Joy Global's subsidiaries -- Joy Mining Machinery and P&H Mining Equipment." http://top5stocks.blogspot.com/2009/04/next-top-stocks.html

  • Report this Comment On June 05, 2009, at 8:13 PM, jbrt wrote:

    Chinas buliding over 500 power plants that will be burning COAL right now , ANR was good last year , got it @ $22.00 dumped at $105.00 , don't forget JRCC , PCX a " spin off " from BTU , from 2 to $8 just in the past 45 days . But bear in mind , COAL gets awful hot when " holding " , you could get BURNT real bad , we ar not the only ones mining it, its all over the world , whether hauling by rail or ship , it isn't cheap . A good reason why productivity is down with a good portion of the current minds idle . Supply and demand , keep the supply low the price only gets higher . No different than oil or any other commodity . Its called MANIPULATION !

  • Report this Comment On June 06, 2009, at 7:57 PM, garberark wrote:

    It is interesting that NONE of the stocks given as examples (BioSolutions, Star Scientific,

    Crawford & Company etc.,) of how you can make huge profits buying small stocks were actually buy recommendations in the Hidden Gems Newsletter. (I am a subscriber). They were never even mentioned. Plainly it is misleading advertising. Anyone can look back and pick out the biggest winners.

  • Report this Comment On June 09, 2009, at 11:21 AM, 3percenthero wrote:

    I AGREE GARBERARK, MY THOUGHT EXACTLY

  • Report this Comment On June 09, 2009, at 5:43 PM, DollTV wrote:

    This isn't a news story. It's an ad for a service. It says nothing.

    Wow!

    You wrote the title to make it look on the Yahoo pages like the stocks referred to would double.

    AIPC is weak and is going to fall after violating the 50 dma soon on heavy volume.

    That's a prediction, sure. But it's one that the market is giving signs about.

    And your article makes it look like AIPC is an easy double.

    Wow... I like the Fool, but this is duplicitous.

  • Report this Comment On June 22, 2009, at 11:20 PM, outofthe60s wrote:

    I've come to the conclusion that TMF co-founders have given up on the "help the small investor" and have now turned to "let's sell newsletters to make a buck". years ago they talked about helping the small time investor and showed all thier portfolios (real and imagined) for free. How can a small investor saving only a couple of hundred bucks a month purchase any TMF newsletter and keep commissions under 2%? Yes the brokerage fee may be under 2% but add the newsletter and you're over. yet they continue to push more adds like this out that really don't mean a thing. It's all just headlines. They are now just like any other scam artist. What's worse is that the prices of each new newsletter keeps going up. What's a shame is that Tom and David no longer care about helping but now only about making more money. I guess that's what it's all about.

  • Report this Comment On July 25, 2009, at 1:40 PM, frigger wrote:

    I don't draw that conclusion. You are cherry picking, perhaps inadvertently, to advance your thesis.

    To compare small caps overall to S&P large let's run data for a larger sample. The S&P 500 by Jan 2009 fell

    39% from 2008. But screening for mkt caps between

    7 and 210 million and stocks over $5 the returns were worse: down 43 to 47 percent, depending on sorting by symbol or market cap. More than 2900 stocks came through the small cap screener. The risk is greater for small cap stocks.

    I don't argue that Hidden Gems can't find the better among them but year to year changes in S&P stocks FDO up 47%, AMGN up 31$ and WMT up 22% were good also, and the chance of finding those big gainers among the huge universe of small caps is poor indeed.

  • Report this Comment On September 19, 2009, at 2:30 PM, sept2749 wrote:

    The site is full of great info and I subscribe to a couple of premium services which are a great "bang for the buck" but I think throwing us a bone (like one favorite small cap) with the above article would be a nice gesture and it certainly wouldn't have a negative impact on sales. On the contrary, if it were a good pick lots more people would probably subscribe. Just my 2 cents!

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