In an article that we wrote in January of this year, titled “Wrong Time For Recommendations,” we commented that the stocks suggested by TheStreet.com for potential investments were reckless at best. The companies that were on the list of TheStreet.com’s “Five Small Cap Stocks to Own Now" and their performance are found below.
| Company | Symbol | 21-Jan-10 | 23-Dec-10 |
Change
|
| InterOil | IOC | $79.05 | $72.95 |
-7.72%
|
| Sharps Compliance | SMED | $9.48 | $4.47 |
-52.85%
|
| China Green Agriculture | CGA | $14.9 |
$9.44
|
-36.64%
|
| Sourcefire | FIRE | $22.84 | $24.85 |
8.80%
|
| Hi-Tech Pharmacal | HITK | $23.94 | $25.03 |
4.55%
|
|
Average Return
|
-16.77%
|
|||
With less than a month to go before a full year has passed since our original article was published, there does exist the possibility these companies can still provide close to the market return (due to their highly volatile nature.) However, we still believe that any widely followed website like TheStreet.com should not recommend stocks that have risen a minimum of 300% as potential purchase candidates. We felt, and still feel, that “it is irresponsible to tell investors that they should buy something that outperformed the market by 15 times.”
As the New Year approaches, be wary of stock recommendations of companies that have significantly outperformed the market in the previous year. Such recommendations will result in below market returns.