This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Winners Come in All Sizes

Lilliputian Domination

No matter the market cap, investors tend to shovel money at whatever investing style is hot. And in 2003, small-cap funds generated enough heat to spark a fund closing stampede. The average small-cap fund was up 43.94% last year, an impressive return that ultimately caused a slew of fund closings by managers overwhelmed by cash. Out of the 76 mutual funds that have closed to new investors in the past year, 36 were small-caps, according to Morningstar.

One fund that thrived while keeping its doors open was the $207 million (PRCGX) Perritt Micro Cap Opportunities fund. Perritt returned 63.5% in 2003, substantially outperforming both its small-cap peers as well as the S&P 500, which only returned 28.7%. (Micro-cap funds are lumped into the small-cap category for comparison sake at Morningstar.)

Michael Corbett, Perritt's manager since 1999, says he will seal his fund to new investors should it hit $300 million, but not because of "a lack of ideas," a common excuse among fund managers with too much cash and nowhere to spend it.

"We have plenty of ideas, the problem is that we can't buy any of them," says Corbett, referring to the investment act that forbids a fund from owning 5% or more of a company. "If there is a company with a $100 million market-cap, the most we can buy is $5 million."

Corbett could expand the number of companies in his portfolio, but he says the extra names would not be worth the extra effort. He currently holds 146 stocks in his portfolio with an average market cap of $169 million.

Corbett gets his investment ideas both internally and externally by soliciting prospects from over 20 research and regional brokerage houses. His strategy is to find tiny companies with attractive fundamentals and favorable growth prospects. The trick in the micro-cap world, says Corbett, is in getting in and out of thinly traded stocks without telegraphing your moves to the rest of the market.

3 of 5

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs