But, for the most part, big stocks just do not have the same kind of growth potential. These 10 dollar stocks, young companies, really do have the potential, if they are good, to double or triple in a year. They will certainly not all give it to you but if you hit it right, you can really have dramatic growth. Mr. Walden, author of a new book titled The Best Stocks for Under 20 Dollars , says revenue and profit growth histories were the two main factors he examined in selecting the stocks. Of those two, he says revenue growth is the most important.
Most small companies go through two to four years without any profits in many cases.
That is by design because these companies pour everything they earn back into building the company. Financial advisor Gene Walden is also careful to satisfy himself that a company's business is sustainable, not a fad and not something that is on the verge of being replaced by a new technology. The key, Mr. Walden says, is to try to identify companies that, within a few years, will be discovered by the large institutional investors and financial analysts. Then you get a double benefit. You get an expansion of the price-earnings ratio because of the interest by Wall Street.