Best-Performing Stocks Under $5 in 2011

BOSTON ( TheStreet) -- Small-cap stocks are mired in a bear market, but select companies trading under $5, such as TeamStaff ( TSTF) and Majesco Entertainment ( COOL), have more than doubled this year, easily surpassing gains by their large-cap rivals.

After a two-year bull market that followed the 2008 financial crisis, small-caps have been brutalized. The Russell 2000 index, a measure of share performance for smaller companies, is down more than 20% since the end of April. Investors have become more risk-averse and have sought safety in dividend-paying, large-cap stocks and U.S. Treasury bonds.

The flight to safety has been fierce, especially as the debt crisis in Europe worsens. Among equities, the Russell 2000 index has dropped 14% this year, while the S&P 500, which holds the companies with the largest market values, is down half that. At the same time, the yield on the 10-year U.S. Treasury has dwindled from 3.3% to less than 2%. Gold has also been a hideout for investors; the precious metal has jumped from about $1,400 in price at the end of 2010 to above $1,900 an ounce earlier this month.

Still, many inexpensive stocks have generated huge returns for lucky stock pickers. In September, as the S&P 500 has wilted 4% on worries Greece will default and the entire Eurozone will crumble, stocks like transportation logistics company Clark Holdings ( GLA) and medical-device maker Mela Sciences ( MELA) have more than doubled.

Given the volatility in the equity market, investors must be careful in searching out small-cap stocks worth the risk, as fortunes can be lost with one bad trade. Trucking giant YRC Worldwide ( YRCW) saw its shares plunge by 92% in September alone, while Virginia-based Commonwealth Bankshares ( CWBS) dropped more than 60% this month.

Some small-cap winners have doubled and, in some cases, quadrupled this year. The following pages detail the best-performing stocks under $5 this year on the New York Stock Exchange, Nasdaq and NYSE Amex, ranked by total return through the first three quarters of 2011.

10. Sify Technologies Ltd. ( SIFY)

Company Profile: Based in India, Sify Technologies is an Internet service provider. Sify also provides e-commerce services to companies in India.

Shares of Sify Technologies spiked higher in April to a high of $8.54 as a high-growth play for investors looking for exposure to India. The company this year has announced partnerships and plans for expansion, and the stock has rallied like fellow India Internet company ( REDF). Both Sify and have fallen steadily since the beginning of May along with the broader market.

Current Share Price: $4.48 (Sept. 28)

2011 Total Return: 100.9%

Analyst Ratings: No research analyst has coverage of Sify. TheStreet Ratings also does not have research on Sify.

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