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BOSTON (

TheStreet

) -- Individual investors are capable of beating stock-market indices, but there's no getting around conducting research.

Few mutual funds, index funds or exchange traded funds shielded investors from last year's rout, which wiped more than $1 trillion off 401(k)s alone. Americans need to accept personal responsibility for their financial goals and educate themselves about the risks and rewards of investment strategies.

To help investors get comfortable with generating investment ideas, TheStreet.com writes a daily small-cap article, "Under the Radar," which identifies lesser-known stocks.

Goldman Sachs

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and

Morgan Stanley

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have neither the time nor the capacity to cover small companies. As a result, many are undervalued. That creates an opportunity for savvy investors.

If you held a large-cap index like the

Dow Jones Industrial Average

over the past 10 years, you would've lost 7% of your investment. But if you owned the

Russell 2000

, a small-cap barometer, you would've posted a 38% gain. Why do small-caps tend to outperform their larger peers?

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Because small caps are growth-stage businesses. As a result, they offer significant return potential -- but also immense risk. If you pick a shaky company, it might go under. But if you discover the next

Google

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, you can get rich.

It might seem impossible to decipher which companies will flourish in our uncertain economy. But if you stick to businesses that you understand and believe in, it's much easier to find winners than you think. Let me give you an example of how subjective stock-picking can help you beat the market.

Last winter, I decided that I needed to save more money, so I started drinking coffee at work instead of shelling out for

Starbucks

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.

I discovered that our office coffee was not only free, but also tasted great. I did some research and found out that the supplier of our flavor cups and brewer was Vermont-based

Green Mountain Coffee Roasters

(GMCR)

.

It stood to reason that lots of New Englanders were trying to save money and traded down to self-brew coffee. Green Mountain was a beneficiary of that trend. I pulled up a stock report, perused its financial statements and checked out the investor-relations section of its Web site.

Green Mountain had decent liquidity and recently paid off a chunk of long-term debt. Most importantly, its quarterly revenue had surged 56% and profit had risen five-fold. Because the company had a market capitalization under $1 billion, it wasn't on Wall Street's radar.

On Feb. 11, I wrote an

article

explaining my investment thesis and recommending that investors buy the stock. Since publication, Green Mountain has surged 163%.

Other "Radar" winners are

Marvel

(MVL)

and

The Buckle

(BKE) - Get Buckle, Inc. Report

. Marvel's stand-alone film studio has undiluted exposure to the superhero genre. The stock is up 72% since our "buy" recommendation, helped by the

Disney

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acquisition.

Similarly, The Buckle was a standout among specialty-retail peers. The company posted comparable-store sales growth in every month of the recession, yet its stock was floundering. The shares have climbed 15% since our recommendation last October and are up 63% from our second "buy" call in January.

I identified those companies by understanding my own generation's consumer preferences. I then did research on their business models and operational performance.

Since we started writing the "Under the Radar" series in May, two-fifths of our recommendations have climbed more than 10% and a fifth are up 20% or more. Such performance demonstrates the strength of the summer rally and the value of our quantitative model.

TheStreet.com's goal is to provide individual investors with actionable investment ideas. But all of our recommendations have a safety-first focus. On Sept. 18, we published an article highlighting recent performance and recommended that investors take profits on winning stocks. That advice is still relevant.

America is battling adverse economic conditions. Unemployment is high, consumers are timid and the real-estate market is weak. TheStreet.com will still provide a daily stock pick, but make sure you do your research and wait for the right price.

-- Reported by Jake Lynch in Boston.