These Stocks Can Easily Double Your Money

By Adam J. Wiederman | More Articles
September 4, 2009 | Comments (6)

Many investors are gloating about their investment performance over the past year.

Who are these people, you ask? Shareholders of these 10 top-performing stocks:

Company	Dividend-Adjusted Increase From Sept. 1, 2008 to Aug. 31, 2009	Market Capitalization on Sept. 1, 2008
Vanda Pharmaceuticals	1,120%	$29.9 million
Diedrich Coffee	1,107%	$9.7 million
OncoGenex Pharmaceuticals (Nasdaq: OGXI )	591%	$12.0 million
Kirland's	493%	$46.9 million
Comstock Homebuilding	477%	$2.3 million
VocalTec Communications	397%	$2.6 million
Spectrum Pharmaceuticals	397%	$53.9 million
Dollar Thrifty Automotive (NYSE: DTG )	327%	$100.4 million
Alpha Pro Tech (AMEX: APT )	313%	$29.7 million
STEC (Nasdaq: STEC )	300%	$507.3 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 10 stocks of the S&P 500 Index over the same time period:

Company	Dividend-Adjusted Increase From Sept. 1, 2008 to Aug. 31, 2009
Micron Technology	74%
Ford (NYSE: F )	70%
AutoNation	67%
Whole Foods Market (Nasdaq: WFMI )	59%
Schering-Plough	47%
O'Reilly Automotive	32%
Expedia	31%
First Horizon National	30%
Western Digital (NYSE: WDC )	26%
Pepsi Bottling Group	25%

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

While the latter is nothing to sneeze at, particularly given that the overall market lost more than 20% over that period, 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:

Ignored.
Obscure.
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. What's more, our recommendations are beating the market by an average of 18 percentage points since the service began in 2003.

If you'd like to see all the 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. Whole Foods is a Stock Advisor recommendation. The Motley Fool's disclosure policy is a top performer.

Read/Post Comments (6) | Recommend This Article (35)

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Report this Comment On September 04, 2009, at 6:42 PM, alphapro wrote:

More and more I just can't believe you guys' gall. months ago I paid what I thought was an excessive amount of money to get your finest stock picks each month and, if I had followed your advice, would have led me through bankruptcy. An example was FO, a few months back which ou gave your highest rating at $40.+. It promptly went into the twenties, and I would have been creamed. Even now it is not at the level you gave as your super stock of the month. For months I have been desperately trying to convince you to accept a rating for, or at least make you aware of alpha protech wich at the time was$1.20 to 2.25, and you would have nothing of it. Now that it is well over doubled My recommendation, you have suddenly "discovered it", but still refuse to allow it a rating. It's probably gonna double again, but your arrogance continues to amaze me. I wish I had not given you my money.
Report this Comment On September 04, 2009, at 11:36 PM, Jcornn wrote:

I have been reading some of the recommendations
by Motley Fool analysts such as this one by Adam Weiderman and it seems to me that the Fools have something to sell and I think it might be the stocks they recomend. Adam has belittled Citigroup (C)
in his analysis just like his peers trashed BAC and
Ford (F). I purchased BAC at $5.97 (today it was $17) , Citigroup at $1.79 (today it was just under $5)
Ford at $2.20 (today it was $7. plus). Although I am not an analyst, my strategy is to see not which stock
the Fools recommend but the ones they downgrade
or belittle in some way and after my own analysis
I make a decision whether to buy or not to buy. My average increase in value today is averaging around 300%. Keep up the good work Fools!
Report this Comment On September 05, 2009, at 5:15 PM, dividendgrowth wrote:

Some of the fool "analysts" are great contrarian indicators.
Report this Comment On September 06, 2009, at 11:15 AM, riverpass wrote:

If these guys know how to make money in stocks they wouldn't be wasting their time writing these opinion articles.
Report this Comment On September 06, 2009, at 1:21 PM, edyboom223 wrote:

I'm glad that I subscribe to the newsletters where I have successfully made money from their recommendations rather than stay on the free boards where I usually hear negative comments from people who are apparently intentionally wasting their time reading articles that they don't value.
Report this Comment On September 06, 2009, at 1:27 PM, davidadro wrote:

Everyone has their own opinions, and usually it doesn’t matter, when that opinion has no harm unto it. The Motley Fool opinions though can cause harm, especially when most of the advice they give is so bad. I say this as respectfully as possible, but their slogan should be changed to Amuse, Amuse, Amuse, as I find that most of what is said would be funny if not so dangerous. I commented on another trashing of a stock they mentioned, concerning AIG, and if I listened to them I would not have doubled my money by keeping it. It just goes to show ya, all one needs is some professional looking website to grab ones attention, but that doesn’t make it a professional one, especially with the guidance given by this one! Peace!

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