SmallCapInvestor.com

Unemployment Hits 10.2%

Fri, 06 Nov 09 13:15:00 -0500

he controversy over the Three Gorges Dam project surrounds the forced relocation of an estimated 1.2 to 2 million people and the negative environmental impacts of massive flooding. In fact, half of the project's total cost was spent relocating people whose homes are now underwater due to the higher river level. Throughout the cruise, we saw many towns that were recently built to provide housing for those who were relocated.

It is important to remember that the communist Chinese government is still all-controlling. The government puts the interest of the people as a whole ahead of the interests of the individual. This is in stark contrast to the U.S. where individual rights are paramount and sometimes taken for granted. The fact that the Chinese government relocated more than a million people to create a hydroelectric dam shouldn't be surprising, but in many other countries this simply wouldn't be able to happen..

How China Transforms the U.S. Stock Market

Thu, 05 Nov 09 14:40:00 -0500

Our second full day in Jiuzhaigou was spent in a small Tibetan village. After adjusting to the bed we slept in late, a welcome rest that was aided by our long hike and sampling a few local beers. We spent the morning with my brother Reid on an exciting two-hour horse ride through the hills surrounding the village.

Reid and I sported our 10 RMB cowboy hats, each complete with an imprint of a bull. The hats seemed appropriate given the activity and my impression of the Chinese economy. We took a number of great photos of the village below and the beautiful terrain while on the ride. Our horses were led by Tibetan women wearing Nike shoes and clothes, another reminder of the effects of globalization and reach of Western culture...

Texas Roadhouse (TXRH) Share Price Up With Lower Menu Prices

Wed, 04 Nov 09 13:20:00 -0500

Yesterday we saw a nice move in the markets. Small-caps bounced back after a two-day losing streak and the Russell 2000 rose 8.22 points to 570.62, or 1.5%. The Dow, Nasdaq, and S&P 500 were essentially flat. This is typical of small-cap stock movement; they tend to lead both to the upside, and to the downside.

Yesterday's buying in small-caps is a bullish sign: investors are looking to add higher beta stocks to their portfolio when these stocks are down. The Russell 2000 small-cap index saw 1331 advancing stocks to 621 declining stocks. The buying clearly shows that investors are finding good entry prices for attractively valued small-caps...

Big Moves in the Coffee Corner

Tue, 03 Nov 09 13:15:00 -0500

I said you should be on the lookout for Peet's Coffee to make a move into the K-Cup single-serve market. And when they do, you should jump on their stock. This is the sales channel that has completely changed the coffee market landscape, and small-cap coffee companies are riding the wave.

"The e-commerce sales channel is making it possible for small-cap companies to expand their sales by multiples that would otherwise be unheard of. Green Mountain Coffee Roasters is up over 300% this year. Another premium coffee roaster, Peet's Coffee, is up 35%. You can get their grounds on Amazon too, but not in a K-Cup. Be on the lookout. If Peet's strikes a partnership with Green Mountain Coffee Roasters to package their grounds in K-Cups, jump all over Peet's stock."

Well, they did, and investors are. But Peet's didn't strike the relationship directly; they simply bought Diedrich which already had it. As I've mentioned, Diedrich started the year as a $0.30 stock. It's now trading at over $25...

Descent into Jiuzhaigou, China

Mon, 02 Nov 09 14:30:00 -0500

Last week was tough for the markets. This morning, futures are pointing higher and generally speaking, the markets are looking to stabilize. At least in the short term. Like I said last week, when the markets are all over the place, I like to turn my attention overseas. So I’ve decided to start the week off by writing more about my experiences here on the ground in China where I’ve been for the last two weeks.

Today I’m writing about a remote area of Western China where the main business is tourism. This growing industry in China is a sign of a rising standard of living. The fact that many Chinese from the developed coastal cities are venturing inland to explore their own country is a positive sign of economic growth.

A few days ago, my wife Carrie and I arrived in Jiuzhaigou, China. The elevation at the airport is 11,500 feet, and on final descent from Chengdu we were able to see snow covered mountain tops. We landed at the region’s airport, a two mile long man-made plateau. To say it was interesting would certainly be an understatement...

Buy Cheap, Sell Dear

Fri, 30 Oct 09 13:40:00 -0400

Between last Thursday's close and this Wednesday's low, the group was down an average of 28.66%. Yikes, that's a pretty good dip. Steep declines like that suggest investors are stampeding toward the exits. I'm looking for the stocks to find support.

The first support line is the 50-day moving average. Almost this entire group of stocks bounced at or near this support line. The chart below shows this for Tri-Valley, which performed perfectly. It is not always this precise, but if you look at charts for the others you'll see similarities. If this group can hold their 50-day moving average lines, that support level is a good entry point. If they break lower, look down to the 200-day moving average. That's quite a drop...

Pelosi Reveals House Healthcare Strategy

Thu, 29 Oct 09 12:20:00 -0400

The simple version of the story is that Healthcare providers typically get paid less per dollar of care (reimbursement) from government insurance programs (Medicaid, Medicare, and COBRA) then from private insurers. These companies, and many investors, will be listening for details regarding reimbursement rates for the proposed public option.

If we look at some of the biggest stock market losers from yesterday, the list is literally crawling with wounded healthcare stocks...

The Business of Water

Wed, 28 Oct 09 14:45:00 -0400

The other day I made the case that oil is going to appreciate because it is a scarce resource, and that therefore oil and gas-exploration companies were a good long-term investment. Of course, as always, a good entry price is critical.

The same case can be made for water. And the companies that treat water to make it safe to drink, and safe to dispose of, are compelling investments. In fact, depending upon your perspective, the case for water could even be stronger. While I could get by for a while without oil, I haven't got a shot without water.

Water demand is growing for use in agriculture, industry, cooking, energy production - the list goes on and on. And we use a lot of it. While you may only drink half a gallon a day, you used around 25 gallons during your last shower. And it takes 1,857 gallons to produce a pound of beef.

In my world, this growing demand for water means looking for small-cap companies that can alleviate the problem, and investing in the best ones. Just yesterday, I recommended a Chinese water stock to subscribers of my SmallCapInvestor PRO advisory service. That stock is poised to increase by more than 50% on growing demand for its suite of water treatment products.

If you were to read Samuel Coleridge's entire poem, you would follow the tale of a mariner who has returned from a long adventure at sea. Despite the abundance of water, the ship's crew has no method by which to remove the salt and make the water potable.

Thankfully, technology has advanced considerably in the last 210 years. Today, the desalination process removes solids like salt and other contaminants from seawater and makes it safe to drink. It is a burgeoning industry of $30 billion today, and according to FORTUNE Magazine, it will double by 2016...

Look overseas when domestic markets send mixed signals

Mon, 26 Oct 09 17:20:00 -0400

When the U.S. stock market is flashing mixed messages, like it has been lately, I return my attention to looking for good entry prices. Unless something has changed my fundamental view of the market, these dips are the time to buy more of the companies I like, for less. Remember, buy cheap, sell dear.

That's what I've been doing in my SmallCapInvestor PRO portfolio. So far this year, nine of eleven positions have been closed with a gain, one greater then 140%.

In small-caps, the drop is typically greater than in large-caps, and the recent market action has born this out once again. Last week the Russell shed 2.7% while the S&P 500 only lost 0.7%. But the reverse is also true, and history has shown that small-caps consistently outperform large caps on the upside. Investors who purchased the Russell 2000 small-cap index ten years ago would have enjoyed returns around 40%, versus a 20% loss for investors in the S%P 500.

I often look to overseas markets like China and India in search of attractive small-cap investments. And why not? For its part, China just reported 8.9% Thrid Quarter growth while the U.S. has stalled. India is growing GDP growth at around 6%.

This morning, many Asian indices were trading higher after South Korea reported excellent quarterly GDP growth. We also heard encouraging news from India's Tata Motors (NYSE:TTM). The nation's largest auto maker doubled profits on increasing sales, and the stock is responding with a 6% gain.

My readers know that I've been bullish on China for some time...

Consumer small-caps hitching a ride

Fri, 23 Oct 09 17:20:00 -0400

You may be familiar with the explorer William Lewis Herndon. In 1851, he departed under orders from the Secretary of the Navy to explore the Valley of the Amazon. The four thousand mile adventure stretched from the Peruvian Andes to the Pacific Ocean on the Brazilian Coast. Lewis' mission? Seek out opportunities for trade and commerce.

Today we heard online retailer Amazon's (Nasdaq:AMZN) results. The aptly named company crushed analyst EPS estimates which had called for $0.33 per share. Amazon beat by 36%, delivering $0.45 a share on $5.04 billion in revenue. What's more, the company raised Q4 guidance. Shares are surging 25%.

Talk about exploring opportunities for trade and commerce. It would have been nearly impossible for the average citizen in 1841 to invest in the opportunities Herndon found in the South American Jungle. But there are plenty of ways for investors to benefit from the trends in e-commerce. And small-caps are the way to do it.

Small-cap companies are overlooked and underappreciated by many investors because it's not economical for analysts to follow them. Until the companies start to break-out, and then they are all the rage. Find them when they are taking-off, and you can ride them for handsome gains...