How to Find the Next Big Small-Cap Stock Winner

Feb. 16, 2017 | RedChip Companies

Historically, small-cap stocks have outperformed relative to larger cap stocks over the long-term, and looking at the results for 2016, the trend has continued.

The Russell 2000 was up 22.5% last year while the S&P 500 returned just under 11%.

For a quarter century, RedChip has helped investors identify the top names in small-cap stocks, leading to big gains for fast-acting investors.

Looking back at our track record of success, we can see several common traits of winning small-cap stocks; things you should look for when picking the next small-cap stock for your portfolio.

First and foremost, the best small-cap stocks have great management teams. Another common trait among the big winners is a products or services that address large, unmet market needs.

There are of course other factors involved, but focusing on these core traits is a great way to reduce risk while positioning yourself for success in small-cap investing.

One stock that has performed very well for our investors over the past year is Knot Offshore Partners (NYSE: KNOP), a master-limited partnership that operates shuttle tankers in the North Sea and off the coast of Brazil.

KNOP has produced triple-digit gains for investors since first airing on our show last year. Led by a strong management team with a long track-record of success, KNOP provides a vital service to the offshore oil industry, and as the stock performance indicates they do it very well.

Another stock that exemplifies the core traits of winning small-cap stocks is Eco-Stim Energy Solutions (NASDAQ: ESES). Up as much as 180% since last fall, the initial success of ESES can be attributed to its penetration of the massive market for unconventional oil field services in Argentina.

The Company’s proprietary technology improves drilling operations for major oil and gas producers, and with expanding operations in Argentina and now the U.S., we expect they will continue to produce solid gains for investors.

Cogint (NASDAQ: COGT) is yet another great example of a winning small-cap stock.

Big Data has become a common term that many investors are familiar with, and COGT has built its success on harnessing the power of Big Data for a growing list of major customers. This success has driven the stock up as much as 38% since November.

Those that have been around the RedChip Nation for some time will recognize the name Cancer Genetics (NASDAQ: CGIX). When we first profiled the stock in 2013 it was on the OTCQB. Within months it uplisted to NASDAQ and produced solid triple-digit gains for investors.

While the stock languished for some time after, we revisited the company last fall, and since that time, the stock has yet again produced big gains for our investors. In fact, since re-initiating coverage on CGIX, the stock has gained more than 100%. We think the future remains very bright for this stock, which is led by a stellar management team that is addressing the enormous need for personalized diagnostics in cancer care.

CGIX is of course not the only company focused on the rapidly evolving field of molecular diagnostics for cancer. We also brought Interpace Diagnostics (NASDAQ: IDXG) to the RedChip Nation last fall when it was trading at a split-adjusted price of just over $1 per share.

Today IDXG is trading for nearly $3 per share.

Looking ahead, another company that very much exemplifies the core winning traits of successful small-cap stocks is Pareteum (NYSE MKT: TEUM).

Led by telecom industry veterans and addressing the ever-more complex needs surrounding the rapidly expanding world of connected devices, TEUM is positioned for major success in 2017. We think it might be one of our biggest winners yet.

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  • Bob McCooey, Senior Vice President The NASDAQ Stock Market