These Stocks Can Easily Double Your Money

Many investors are gloating about their investment performance this year.

Who are these people, you ask? Shareholders of these top-performing stocks of the first half of 2009:

Company

Dividend-Adjusted Increase From 1/1/2009-6/30/2009

Market Capitalization on 1/1/2009

Diedrich Coffee

6,506%

$2.0 million

Vanda Pharmaceuticals (Nasdaq: VNDA  )

2,254%

$13.3 million

Air Transport Services Group

1,206%

$11.4 million

Dollar Thrifty Automotive Group

1,180%

$23.6 million

Cell Therapeutics (Nasdaq: CTIC  )

1,129%

$17.5 million

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

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

Company

Dividend-Adjusted Increase From 1/1/2009-6/30/2009

XL Capital (NYSE: XL  )

221%

Ford (NYSE: F  )

165%

Sprint Nextel (NYSE: S  )

163%

Genworth Financial (NYSE: GNW  )

147%

Tenet Healthcare (NYSE: THC  )

145%

Data from Capital IQ, a division of Standard & Poor’s and Google Finance.

While the latter is nothing to sneeze at, particularly given that the overall market rose only 3.2%, wouldn't you rather have the former?

Where you'll find the double-baggers
Small caps' tendency to outperform their large-cap brethren isn't just a down-market happenstance -- it held true in 2005, 2006, 2007, and 2008 as well.

In any market, the stocks with the most potential for outsized returns (stocks that will 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 beating the market -- and one stock has already skyrocketed 85%!

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.

This article was originally published June 2, 2009. It has been updated.

Adam J. Wiederman owns no shares of the companies mentioned above. Sprint Nextel is an Inside Value recommendation. The Motley Fool's disclosure policy is a top-performer.


Read/Post Comments (3) | Recommend This Article (54)

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 July 05, 2009, at 10:53 AM, plange01 wrote:

    you can add avis/budget(car) senior sunrise(snz) and satyam computer(say) to the list.do a little research on these.all can easily double and one already has a few times over!

  • Report this Comment On July 06, 2009, at 2:35 PM, sunbakd1 wrote:

    Easily double your money or lose it all quick!

  • Report this Comment On July 17, 2009, at 8:38 AM, feudi wrote:

    Tenet HealthCare? You gotta be nuts to buy this stock or haven't you read the papers since October 2002? No wonder they call this site "the Motley Fool". Didn't Obama just announce that hospitals will cut their prices by $155 Billion to make his Plan work? That certainly doesn't bode well for future earnings now does it?

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