Acknowledgments xi
INTRODUCTION The Story of a Small-Cap Investor 1
CHAPTER 1 Start Small, Finish Big—Discover Big Profits in Small-Cap Stocks 9
Small-Cap Investor: Eight-Step Process for Big Profits from Small Stocks 10
Small Caps as Generators of Growth 11
An Example of Small-Cap Success 15
Small-Cap Value Stocks Outperform Large-Cap Growth Stocks 19
Profitable Small Caps Don’t Always Make Gains on Day One 19
The Inefficient Market Theory: The Small-Cap Advantage 24
The Market as an Emotional Being 25
CHAPTER 2 Big Ideas for Big Profits 29
Spotting the Next Big Idea 30
Expanding Your Search 36
The Competitive Edge 37
Spotting Institutional Activity 38
CHAPTER 3 Finding Great Small-Cap Stocks 43
Growth + Value = Profits 43
Success Stories from the Past 50
IPOs Are the Genesis of Small Caps 53
Spotting Growth Sector Trends 55
News You Can Use 59
You’ve Found an Interesting Trend or Company—Now What? 60
CHAPTER 4 Understanding and Evaluating Financial Statements 65
Generally Accepted Accounting Principles and the Basics of Accrual Accounting 67
Financial Statements Made Simple 69
Ten Key Metrics to Review in Every Financial Statement 72
What Exactly Are Earnings? 76
A Quality Test: Cash Flow Instead of Earnings 83
Ten Accounting Red Flags 86
CHAPTER 5 Financial Projections and Valuations 91
Understanding Financial Guidance 92
A Reality Check 93
Guidance Caveats 96
Interpreting Analyst Estimates 97
Companies Play the Earnings Game 98
Financial Trends for Spotting Promising Small Caps 99
CHAPTER 6 Taking the Mystery Out of Technical Analysis and Trading for Quick Profits 103
Some Technical Basics 105
Accumulation and Distribution 118
The Relative Price of a Stock 120
CHAPTER 7 Trading Strategies for Successfully Buying and Selling Small-Cap Stocks 123
Liquidity Considerations with Small-Cap Investing 124
Risk Tolerance 127
Risk Awareness, an Essential Attribute 130
Timing Decisions 133
Trading Techniques 136
CHAPTER 8 Portfolio Diversification and Allocation 139
Equity Diversification Methods 140
Diversification Mistakes 141
Overdiversification 142
Using Mutual Funds and ETFs to Diversify 143
Risk Tolerance as a Means for Diversifying Your Portfolio 147
Asset Allocation Basics 148
CHAPTER 9 Buy Small Caps to Grow Your Portfolio 151
A Track Record of Small-Cap Success 152
The Key Drivers to Growth 153
Early Bird Gets the Worm 154
Appendix 159
Notes 163
About the Author 165
Index 167
IAN WYATT is the founder and President of Business Financial Publishing and the Chief Investment Strategist of SmallCapInvestor.com. He is the driving force behind the growth of Business Financial Publishing, recognized by Inc. magazine in 2008 as the 185th fastest growing private company in the United States. Wyatt also plays an active role in the investment research activities of the company, and as a well-regarded small-cap stock expert, he currently leads his company's premier small-cap stock investing service, SmallCapInvestor.com PRO. He has been interviewed or cited in numerous well-known publications, including Marketwatch.com, Kiplinger's Personal Finance magazine, Barron's, Forbes.com, and the Dick Davis Digest, among others. For more insights into small-cap investing, visit www.smallcapinvestor.com and www.ianwyatt.com.
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