Finding Big Profits in Out-of-the-Way Stocks

When I travel for work or pleasure, one of my favorite things to do is find out-of-the-way places to eat. After all, who wants to go to the same old McDonald’s (MCD, Rated “A-”) or Wendy’s (WEN, Rated “B-”) restaurants, everyone knows about, just to eat food you can get back home?

In San Francisco this past week, for instance, I had my first dinner at a family-owned Hunan restaurant in Chinatown that came highly recommended online and by my taxi driver. My face felt like it was going to melt off at one point from the spicy food … but it was darn good!

The same goes for the massive “one of everything from the ocean” plate I had on a previous trip to Amsterdam … the delicious oysters at an off-the-beaten-path place at last year’s MoneyShow Toronto … and the massive pork knuckle served up at a monastery/restaurant I had to hike a couple of miles uphill to get to outside of Munich.

So why does this matter for investors like you? New research we’ve been conducting suggests that approach can pay off handsomely in the stock market, too.

I have nothing against stocks like Apple (AAPL, Rated “B-”), Amazon.com (AMZN, Rated “C”), or Microsoft (MSFT, Rated “A”). They have their positive attributes, and they’ve done well for investors in the last few years.

But these mega-cap names are followed by dozens and dozens of analysts. Tim Cook can’t walk down the street, and Jeff Bezos can’t write an email, without everyone on Wall Street weighing in on the implications for their companies’ shares. Everything those companies do is sliced, diced, and analyzed within seconds. That makes it very hard for individual investors to get an edge.

On the other hand, there are literally hundreds and hundreds of stocks that receive very little traditional Wall Street coverage at all. They may have just a handful of analysts following them … and in some cases, as few as one (or none)! There are many reasons for that. But oftentimes, those reasons have more to do with the nature and incentive structure of the traditional stock analysis business than the individual merits of those firms.

I don’t want to say too much more at this point. But suffice it to say we’re working on ways to change the equation for investors like you – and we’ll have more details before long. After all, I believe there are big profits to be had in out-of-the-way stocks, just like I know there are great meals to be had in out-of-the-way spots.

Until next time,

Mike