Matt’s Note: The last few weeks in Stock Power Daily have all built up to this moment.
Yesterday, Adam released the final version of his $5 Stocks to Watch list. From nearly 300 candidates, Adam has narrowed it down to just 37 names.
Each stock ranks highly on Adam’s proprietary Stock Power Ratings system … which means they’re positioned to beat the market by between 2X and 3X over the next 12 months.
But these stocks, all priced at $5 per share or less, offer the chance to get a leg up on the major financial firms that typically control markets. To own these high-quality companies before institutional investors can send prices soaring.
Adam has his final selection of stocks with the greatest potential on hand now. Click here to see how to gain access to his highest-conviction recommendations.
If you’re still curious about how this list came together, we’ve got you covered.
Yesterday, I caught up with Adam again to discuss his process and why his final recommendations are well-positioned for this exact market environment…
Why Small-Cap Stocks?
Matt: Hey Adam, thanks for meeting with me again today.
Adam: Of course, Matt, I always enjoy talking shop with you.
Matt: I understand you’re about to release the final version of your $5 Stocks to Watch list. These past few weeks, you’ve been trimming the list down from nearly 300 names to a select few. Can you tell our readers why you went about it this way?
Adam: I know that a lot of people are itching to get back into the markets right now. I get it. Stocks are well off their lows, and there’s a chance we’ve seen the worst of this bear market. I personally think there’s more to come … but even if that’s the case, it’s more of an opportunity than something to fret over.
The problem is, identifying the best stocks now is very different from how it was just a few years ago. We’re in a totally different economic environment. Inflation is high — not crazy high, but higher than it’s been in many decades. Interest rates are also high. And most investors are either too young or simply don’t remember what it was like to invest in conditions like these.
The large-cap tech trade? The IPOs? The “innovation” stocks? Hate to break it to people, but they’re done. The easy money that kept a lot of these companies afloat is all dried up, and companies are going to need a lot more than a fancy pitch deck and a vague idea of profits sometime down the road to attract capital.
Right now, there’s a lot of talk about small-cap stocks being the trade to make. I’ve been saying that for a while now. But what most people don’t get is that a ton of small-cap stocks, even now, simply aren’t worth the price they’re trading at.
Matt: It’s funny, some stocks that were formerly large cap or mid cap are now considered small caps after the bear market smacked them back down to earth. But as you say, that doesn’t make them good buys.
Adam: Exactly. Right now it’s extremely important to separate the good from the bad, and you definitely don’t want to buy a basket of just any small caps and call it a day. There’s a much better opportunity in front of us.
The $5 Rule
Matt: You’re talking about the $5 rule.
Adam: Of course … we’ve only been talking about it all month, right?!
The $5 rule is the perfect setup for small, overlooked stocks right now. There are a slew of small, high-quality and now cheaply priced stocks that the bear market has unfairly punished. Their share prices were pushed below the $5 threshold … which, as you know, means major institutions are forced to sell them.
After they sell them, they can’t buy back in, either. Not until they cross back above $5 that is.
It has nothing to do with the company itself. It’s all because of a set of archaic SEC rules that these institutions must obey.
So what we’ve done is find every stock trading for $5 in the market that’s listed on the New York Stock Exchange or the Nasdaq, filtered out all the ones that present too much risk and cut the list down even more to the ones that present the greatest potential reward.
We’ve published that list for all to see. If you’ve been following along, we started with 298 tickers, cut it down to 127 and then cut it again to 37 companies.
But I want to talk about more than just that list, Matt.
Matt: You mean the handful of stocks you’re sharing with your 10X Stocks subscribers?
I’ve seen your research on these companies … and let me just say, I’m truly excited for what’s in store for anyone who gets into these positions now.
You believe these names could return 500% or more over the next year. Even if we see the recession everyone’s been waiting for.
Tell me, Adam, how is that possible?
Adam: I know you’re not expecting a simple answer, but that’s what I have. All of these stocks are in the top tier of the Stock Power Ratings system. Every single one is a 95 or above. That earns them the “Strong Bullish” label.
Normally, we can expect stocks like these to strongly outperform the market — on average, by 3X — over the next 12 months. And I absolutely believe they will.
But we’re working with so much more here. These are small-cap stocks — which tend to go ape and trounce large-cap gains as bear markets end.
They’re diversified into several mega trends on my radar right now: a fossil fuel boom, a new bull market in precious metals and relative strength in emerging markets.
And of course, each stock is trading below $5. That means once all these other tailwinds come to fruition and their share prices rise above $5, we can count on institutions to buy in for the same reasons we are, pushing prices even higher.
Matt: And it’s for these reasons you believe each of these stocks can rise 500% or more over the next year. So let’s say someone puts $1,000 in each one. By this time next year, you’re thinking they’ll have $25,000?
Adam: I am.
It’s hard to believe, I know, with everything going on with the economy. But these stocks are outliers in the making. All my years of experience and everything the Stock Power Ratings system has proven to me since I invented it tells me this will happen.
Matt: Well, Adam, it sounds like you’re doing a lot to help everyday investors right now.
Investing has become a lot trickier over the last year or so, and a shaky economy won’t make it any easier.
You’ve given our readers a taste of your research, for free, over these last few weeks as you’ve walked through the process of trimming down that list of small-cap stocks to watch. It’s very generous of you, I have to say.
And I know you can’t wait for people to access your final recommendations from that list.
Adam: It’s just what I love to do, Matt. You know what I mean, you’re the same way.
We get our kicks investing and researching the markets. Being able to share that with people, and potentially make a difference in their lives, is its own reward.
Matt: Amen to that. Alright, I’ll let you go, I know we’re all busy preparing for this week’s launch. Thanks so much for talking today.
Adam: Thank you as well, Matt!
If you’re looking to learn more about the top stocks Adam’s about to share with his 10X Stocks subscribers, go here and check out his brand-new webinar.
It contains some not-yet-discussed details about Adam’s process and shows a ton of historical evidence for how the $5 rule played out in the past.
Just go right here for all the details.
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets