Small-Cap Spotlight: A Look at Crocs and Dendreon

What struck me when I first stumbled on Dendreon well before the March FDA vote was how negative much of the analyst community was toward the company. Based on what analysts were saying, you'd think Dendreon shouldn't have been in business. In particular, the bears were confident that the upcoming Provenge phase 3 trial would fail to meet its primary endpoints.

As it turned out, the conviction of the short-sellers and the confidence of the negative analysts set up the perfect situation for a short squeeze, despite the fact that the results left a lot of room for interpretation.

The primary driver behind the big moves in Dendreon has been sentiment: the shorts and analysts being wrong about the March 29 vote, and the big decline from levels near $20 back down to single digits happening when the outlook turned out to be dimmer than the bulls were expecting. Thursday's big move once again illustrates how the massive short position can generate extreme swings in the share price.

I believe that Provenge has potential, and it may end up being a winner sooner or later. But there have been enough doubters about the effectiveness of the treatment -- including professionals in the oncology field -- to make me think that the road ahead will be long and difficult. If I'm putting my money to work and buying shares in a small-cap company, I want growth and a solid plan for the future, not just speculation about a drug the entire market already is focusing on..