Exciting Opportunities Surfacing

After quite a lull, I’m beginning to see a lot more exciting small- cap companies that are attractive in this market. If we get a strong reversal in stock prices, these high-growth/high-risk stocks should benefit the most.

Remember Shengdatech, Inc. (NASDAQ/SDTH)? I like this small company, but it’s not as if it operates in a very exciting industry. This company, which manufactures what is known as nano precipitated calcium carbonate (NPCC), is just one of many small- cap Chinese companies that are growing fast while meeting the raw material demands of a fast-growing economy.

I’ve had good luck this past year identifying solid, wealth-creating companies that operate in unexciting industries. I’m convinced that, in any speculative equity portfolio, it pays to mix up the kind of businesses you own stock in — not just for the sake of diversification, but in order to make money from what institutional investors like to invest in. You don’t necessarily want to own a bunch of stocks that are traders’ favorites. The volatility can be hard on you.

I recently discovered an exciting jewelry company that’s growing fast servicing the Chinese marketplace. Not that the jewelry business is that exciting, but the company is growing very quickly.

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This small company operates its business in both the retail and wholesale end of the business. This is the best and only way to be successful in the jewelry/accessory business. In its third quarter of 2007, the company’s revenues grew 90% to more than thirty-six million dollars, while profits grew 200% to $2.7 million. The company plans a major expansion of its business in 2008 and the stock is currently trading for under 16 times’ this year’s earnings.

I’m hopeful that small-cap stocks can reaccelerate over the near term. I know from following this sector for more than a decade that great opportunities seem to occur in waves. I think we’re at the beginning of a new wave of exciting investment opportunities right now.