After the market in 2009, I've been searching the internet for some new ideas. Not surprisingly, I came across an article with the following sensational title, "Five Small-Cap Stocks to Own Now" from TheStreet.com.
The five stocks recommended are as follow:
- InterOil (IOC)
- Sharps Compliance (SMED)
- China Green Agriculture (CGA)
- Sourcefire (FIRE)
- Hi-Tech Pharmacal (HITK)
If someone is searching for a great gamble then these companies might fit the bill. For anyone who is concerned about safety of principal with a margin of safety and the prospect of buying-and-holding, these companies are far from ideal. Here is the simplest reason why. All of these stocks have risen by more than 300% over the past year.
If someone chooses to buy-and-hold, one should have considered these names at or near the low in early 2009. It is irresponsible to tell investors that they should buy something that outperformed the market by 15 times. The job of a reporter should be to report the facts which, in the area of financial journalism, often arrive too late. In this case, 300%+ after the fact. It isn't hard to go back to the earnings calls and report that company margins improved, market conditions stabilized, and so on. However, to expound on the virtues of companies that have exceeded even the most optimist scenarios within the context of a secular bear market borders on criminality when judged on the basis of the wide distribution that TheStreet.com has.
For investors seeking safety and fair returns on their investments, they should examine our approach as outlined in the article "Buy Low, Sell High.". - Art