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These Stocks Can Easily Double Your Money

A lot of investors are already gloating about their investing performance in 2010.

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



Dividend-Adjusted Return (YTD)

Market Capitalization
on Jan. 1, 2009

InterMune (Nasdaq: ITMN  )



$608.6 million

Pacific Ethanol (Nasdaq: PEIX  )



$40.9 million

American Capital (Nasdaq: ACAS  )



$685.3 million

Joe's Jeans (Nasdaq: JOEZ  )



$81.6 million

Rexahn Pharmaceuticals (AMEX: RNN  )



$48.9 million

Data from Capital IQ, a division of Standard & Poor's.
YTD = year to date.

Notice anything about those companies? They're small. Very small. Now compare their performance with some of the top stocks of the S&P 500 index over the same time:



Dividend-Adjusted Increase (YTD)




Cliffs Natural Resources






Boeing (NYSE: BA  )



Citigroup (NYSE: C  )



Data from Capital IQ, a division of Standard & Poor's.
YTD = year to date.

While the latter results are nothing to sneeze at, particularly given that the overall market is up just 4% 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:

  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 the past few years' market volatility is sending many investors into the arms of stable large-cap stocks. Which makes now an even better time to buy up shares of 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.

If you'd like to see all the stocks that have made it into our small-cap portfolio, you can do so completely free. Click here for more information.

Already a member of Hidden Gems? Log in here.

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

Adam J. Wiederman doesn't own shares of the companies mentioned above. The Motley Fool's disclosure policy is a top performer.

Read/Post Comments (2) | Recommend This Article (30)

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  • Report this Comment On March 18, 2010, at 11:13 AM, Louiethelooper wrote:

    RNN has two blockbuster drugs in late Phase II studies. They already have a partnership agreement with Teva Pharm. that will generate milestone infusions of cash and royalty payments. Several other big pharms (according to CEO Dr. Ahn) have signed confidentiality agreements with RNN. So, another partnership(s) could be in the offing.

    To fully understand the potential of RNN, you only need to read about its ED drug Zoraxel. In addition to promoting blood flow like the other ED drugs, Zoraxel also stimulates libido, a lack of which being the reason that the better know ED drugs very often don't work for 30% to 40% of men.

    RNN, after Phae II results are released in late April and early May, could easily trade north of $5 by mid summer. Maybe higher, if another partnership with a larger pharm is completed.

  • Report this Comment On March 19, 2010, at 12:22 PM, ChrisConner79 wrote:

    I like RNN, but ANX is a better buy right now with two potential NDA's in line for acceptance by the FDA and a lot of cash to manage the process until acceptance. Particularly for a share price of under .25 pps it won't take much to double your money in it. This company also has dedicated, intelligent leadership in Brian Culley who has consistently exhibited a devotion to this company and the product pipeline they are developing.

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