This column was originally published on RealMoney on March 10 at 1:00 p.m. EST. It's being republished as a bonus for TheStreet.com readers.What do we do in a volatile, choppy market full of fake-outs and unsustainable moves? There are just so many crosscurrents and hidden forces out there that it's easy to get hurt. But what if we can find a more predictable market within the market, a market that isn't subject to the same dynamics as the large-cap, high-priced stocks that get so much coverage by CNBC, The Wall Street Journal and others? Low-priced stocks, those that trade for less than $5, are worth a look. Most stocks under $5 are ignored by the majority of investment firms; there just isn't much demand for these shares. (Could it be any other way? If demand was widespread, the stocks would be trading at higher prices.) Think of these low-priced stocks as the subsurface ocean water during a big storm. The surface is turbulent and choppy. But underneath this mess, the sea is calm and more predictable. The forces of supply and demand still control the price action, but these low-profile stocks have less of a tendency to trade in sync with the market. They also can produce sizeable gains. After all, a $2 stock that advances 50 cents produces a 25% gain. But a 50-cent decline -- entirely possible with the members of this more volatile group -- puts a 25% dent in your account.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Generex Biotechnology, Avanex, Transmeta and Stratex Networks to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices. P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
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