Frank Curzio
Most investors are now fully aware of the risks in the equity markets. The credit crisis, rising inflation and slowing growth have brought pain to a range of stocks. After listening to over 100 large-cap conference calls during the past earnings season, I've heard only a handful predict a positive outlook on the U.S. economy over the next 12 months.
Negative investor sentiment can create even more havoc for small companies, as they are less diversified than large-caps and more levered to the U.S. economy. My Stocks Under $10 portfolio has proved challenging in this environment. But in these rough times, investors seem to make the crucial mistake of selling out of small-caps when history suggests that these times offer the best opportunities to invest. Years ago, it was easy to dismiss a troika of stocks that were trading under $10: Apple (AAPL Quote - Cramer on AAPL - Stock Picks), Research In Motion (RIMM Quote - Cramer on RIMM - Stock Picks), and U.S. Steel (X Quote - Cramer on X - Stock Picks). Market conditions were similar to the one we are currently experiencing, and there seemed to be little reason to hold these stocks. Today, these three stocks have made millionaires out of investors who ignored the short-term headwinds and focused on the long term, or where these companies would be three to five years from now. I know that's difficult to say given the current macro picture and the fact that every time you tune into CNBC, the words "Oil Crisis" are pasted on the top of the screen. With that said, there are many small-caps -- notably in the under $10 space -- that have promising potential if you are willing to look past the short-term headwinds.
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