A major asset for those starting to invest at the college age is having time on their side. There is no greater force in the universe, especially in investing. That is why legendary investor Warren Buffett has often stated that his favorite holding period is “forever.”
Time also permits investing in small-cap stocks, since they are riskier but they have outperformed large-cap stocks over the long run.
If retirement was near, it would not be a good idea to buy small-cap stocks. It is better to load up on high-yield, low beta stocks such as Coca-Cola (NYSE: KO), Wal-Mart (NYSE: WMT), and others. It is even better if these are “Dividend Aristocrats,” as detailed in a previous article on this site.
But time allows for profitable investing in small-cap stocks, too.
Many Small-Cap Stocks Outperform
Three small-cap stocks that were reviewed favorably in previous articles have performed very well and merit being brought to the attention of investors with time as an asset, again: Labor Smart (NASDAQ: LTNC), Quadrant 4 Systems (NASDAQ: QFORQ), and Americas Petrogas (OTC: APEOF).
Labor SMART is a small-cap company operating in the $29 billion segment of the $100 billion staffing industry. A high tech firm, Quadrant 4 Systems is focused on SMAC (social, mobile, analytic, cloud) operations. Headquartered in Calgary, the heart of the fossil fuel-rich Alberta province of Canada, Americas Petrogas is an oil and natural gas entity.
Since writing about these stocks earlier, the share price of each has jumped sharply.
Quadrant 4 Systems just hit a record high: it is up more than 3,000 percent for the last 52 weeks. Since the summer, Americas Petrogas has soared more than 50 percent. Labor SMART is up in recent market action, too.
Small-Cap Stocks Are Typically in Growing Industries
As investors buy for the future, most of important of all, there are bullish reasons for expecting the price rises to continue as all are in expanding industries.
The staffing industry has been a huge success story since the Great Recession. Firms are weary of hiring full-time workers. The added expenses of the Affordable Care Act, or Obamacare, makes companies even more inclined to hire temporary workers. Labor SMART can only benefit from that massive shift in the economy.
Americas Petrogas has hired an investment bank for a “strategic review” to enhance shareholder value. It is working as the stock price has increased significantly just on the promise of what might transpire. When something actually does happen, the share price should rise even more.
Continuing to add clients and increase revenues, Quadrant 4 Systems is expanding greatly. It services clients in retail, healthcare, manufacturing, financial services, and other sectors. The company has positioned itself to benefit from expanding demand in a number of lucrative sectors. According to an interview with the CEO, its products are very much ahead of the competition. Up four figures, the share price has responded accordingly to that superiority.
Jack Bogle, the legendary investor who founded the Vanguard mutual fund group, had 10 rules for investing, as reviewed in another article on this site. Rule number two is, “Time is your friend, impulse is your enemy.” Small-cap companies like Quadrant 4 Systems, Labor SMART, and Americas Petrogas do more than make time a “friend” in investing: they become reliable and rewarding allies.
What are your thoughts on these three small-cap companies, and small-cap stocks in general?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.