The Foolish Approach to Investing in Small-Cap Stocks
by Wayne A. Thorp
Small-cap companies have long captured the attention of investors looking for tomorrows market heavyweight. However, with thousands of small caps out there, finding the most promising firms that warrant further research is a daunting task.
Stock screening allows you to winnow the universe of companies down to a more manageable group that you can then analyze more closely. How can you screen for small caps?
In this article
- Foolish 8 Filters
- Small Companies
- Net Profit Margin
- Cash Flow
- Low Liquidity
- Insider Holdings
- Price & Performance
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One method was derived by David and Tom Gardner, founders of the Motley Fool (www.fool.com). The methodology—the Foolish 8 small-cap investing system—looks for profitable and rapidly growing small companies with strong price momentum.
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