Power Maxx Blog

We are amidst a financial crisis, this is nothing new. Companies are struggling to stay afloat left right and backwards. Among the companies hardest hit in this environment are small cap stocks. These stocks are often small companies that are growth stories, and are trying to make it big. Unfortunately for them, this is quite possibly the toughest environment to try to start up a venture in.

In a normal market, a good small cap will yield gains that far surpass those of the big boys, which provide a small but often consistent yearly gain accompanied by a dividend payout to give you an incentive to park your money with them. The difficult point is that many of these small caps will not survive, and it is quite a task to try to pick those that do. Add this to the current market turmoil, and your job just got that much harder.

I’ll admit, that in the good times, my small caps were all solid, and were set to yield me some pretty sweet gains, but then the financial crisis hit and things took a turn for the worse. Although for the most part I was able to sell off and avoid even heavier losses than I had already sustained, the numbers still don’t look pretty. Despite these incredible drops in value, the same principles of picking a good large cap that has been unfairly devalued apply to picking a good small cap.

In my opinion, and I’m sure others will agree, there are a few other factors you should consider, among the most important being cash in the bank, current debt load, both of which will affect their ability to expand and grow profitable. This is the whole appeal of small caps - big expansion and growth for big gains.

I recently began purchasing back some of my small caps that were previously sold off. All of these companies have a solid product, decent balance sheets, and continued potential to produce results and in turn growth once the market turns around. Money usually flows back into large caps first, and then small caps, but when they rebound, the upswing will be just as violent as the downswing that the small caps all experienced over the past year.

I listed these stocks in my previous article about Timminco that you can read here, but to re-iterate, here are my picks for small cap growth stocks that are still good buys for the future once the market returns to its normal course of growth:

• Birchcliff Energy - BIR
• BIO MS Medical - MS
• Bankers Petroleum - BNK
• Timminco LTD - TIM
• Absolute Software - ABT

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