Invest In Microcap Stocks For Highest ReturnsInvest In Microcap Stocks For Highest Returns

Micro-cap Stocks are much maligned for being too volatile for the average investor. But, as experienced investors know, highly volatile investments can yield the best investment returns. A quick look at the best-performing stocks of 2005 proves this fact.

The Best Stocks of 2005 Were All Micro-caps

Of the 25 stocks that performed best in 2005, only Nutri/System (NTRI) had a market cap of $100 million at the start of the year. Ocean West Holding (OWHC), which was up an astounding 2,170% for calendar year 2005, ended the year with a mere $59 million market cap (that's after returning 2700%).

To be sure, micro-caps are volatile, (Ocean West is down over 50% after the first quarter of 2006, erasing most of 2005's incredible gains), but the potential returns still make them a worthwhile risk for a small portion of your investment portfolio.

Of the 25 top-performing stocks of 2005, all of which returned at least 510%, 13 were down as of this writing (April 15, 2006), and 12 were up. The average stock that was down had lost 19.93%, which represents about one-quarter of its 2005 gains.

Of the 12 stocks that were up in the Year-to-Date period, the average return was 88.68%. Half of those stocks had already returned over 100% returns (CanWest Petroleum; U.S. Gold; BioTransplant; Warrior Energy Service; Stem Cell Innovations; and Transnational Automotive Group).

An equal investment in all 25 of these stocks on January 1, 2006 would have yielded a 32.20% return by April 15.

Don't Let Your Guard Down

Much of the criticisms of micro-caps are true: they are highly volatile; they are potentially the targets of pump-and-dump schemes; they can be difficult to liquidate due to low trading volume.

For these reasons, due diligence is extremely important. A company whose SEC filings are habitually late, or one that issues amendment after amendment for important filings like the quarterly or annual reports is usually not a solid investment.

But these are just red flags, and the company's fundamentals are the ultimate arbiter of its worth. In times of rising interest rates, the balance sheet is particularly important, since high levels of long-term debt can cripple small companies as rates rise.

Finally, micro-caps should not represent more than 10% of any individual portfolio, but ignoring these tiny gems will deprive investors of potential breakouts.

by B Patrick Regan
References and Bibliography

B. Patrick Regan is a freelance writer and a staff writer at

Rated:NR/0 Votes
Add To My Article Reading List
Add To My Article Reading List
Print Article
More Article By B Patrick Regan
More Article by B Patrick Regan
More Articles From Stocks and Mutual Funds
More Articles From Stocks and Mutual Funds
Related Articles and Readings
Flying Ultra Micro R/C Planes By: Jeffrey Richard
Ultra Micro If you are looking for a great way to have a little fun in your backyard, why not take a look at ultra micro radio control planes With the advances in technology especially in batteries, the sky is the limit for flying very ...
Learn to Invest Money in Small Cap Stocks and Make Triple Digit Profits Part Three By: J Shin Kim
Are you tired of earning 5%, 8%, even 15% annual returns from your stock portfolio? Want to earn triple digit gains from your stock picks? Not only is it possible but it's absolutely probable with a few solid strategies.In Part Two of this article, I reviewed the importance of having ...
High Volatility Investments By: James Andrews
Penny stocks and options are high volatility investments that attract both the trader and the long term investor because of the small amount of capital required to make substantial gains as compared with less volatile higher priced stocks. The long term investor buys a stock believing that a company's ...
Increasing Applications of Micro Bubbles By: Ken Yap
There has been a lot of research studies on micro bubbles in recent years.Micro bubbles are miniature gas bubbles of less than 50 microns diameter in water. The micro bubbles, which mostly contain oxygen or air, can remain suspended in the water for an extended period. Gradually, the gas within ...
Learn How Using This Micro-Blogging Shortcut Can You Save Time By: Titus Hoskins
One of the most annoying problems with online blogging and using all the different social media sites is the time factor Most webmasters and marketing professionals have more than one blog or submit their content to many different social ...
The information provided in this article and/or the comments is the sole responsibility of their respective authors and does not necessarily reflect the opinion of  does not endorse any article and/or comments published by our web users unless otherwise noted. 

Member Panel

login to submit articles and more


  • » Active Categories: 419
  • » Active Articles:252096
  • » Active Authors:32163
  • » Active Members: 35787
  • » Statistics Updated:
    - Sat Aug 11th, 2018 01:04PM EST