The Little Book of Big Profits from Small Stocks + Website 1st (first) edition

by Hilary Kramer

From drug stocks that may have been punished because an FDA approval failed to materialize when Wall Street expected it to, to the overly zealous selling off of Ford, there are many great low-priced stock opportunities. In this Little Book you'll

Genres: Finance, Nonfiction, Audiobook, Economics

Hardcover

First published January 1, 2011

Reviews

[InvestingByTheBooks.com · Rating 3 out of 5]

Hilary Kramer, editor of two investment letters and previous hedge fund manager and equity analyst at Morgan Stanley and Lehman here shares her hard earned insights from 25 years of small cap investing. Her starting point is that of a contrarian searching for beaten down and unloved stocks that have potential for spectacular returns to glory. The limited market value of smaller stocks gives significant stock market profits if large institutions start to buy the shares. After an introduction Kramer kicks off with three chapters covering the three categories of small cap stocks she favors. They are the fallen angels, the undiscovered growth companies and companies in the bargain bin. They all have in common that they are low priced, undervalued and have catalysts that give them potential for higher stock prices.

Fallen angels are previously well-regarded companies that have fallen from grace and have seen tumbling share prices as a result. Prospects could for example be found among the stocks with the largest declines over a period of time. When a list of prospects has been identified the real work starts. According to the author there are two questions to be asked: “what went wrong?” and “can it be fixed?”. Without knowing the answers there is no way of distinguishing the potential comeback kid from the structurally impaired that should be avoided at all costs. Kramer correctly warns that the list will turn out “more demons than angels” – so be very picky. Undiscovered growth stocks are longer-term holdings where you just make money by sitting still as long as the company is doing structurally fine. These are not the highflying darling stocks of Wall Street. Instead look for stocks in mundane and boring below-the-radar-sectors that have produced high and stable sales and profit growth over the previous economic cycle. Kramer puts her growth threshold to 15 percent CAGR and also requires a debt-to-equity ratio of 50 percent. Finally the author searches for treasures in the bargain bin by looking for companies that combine a price-to-tangible book below one, a minimum debt-to-equity ratio of 30 percent, a share price below USD 10 and that is profitable. The purpose is to find companies that have net assets that are undervalued by the stock market. Often opportunities will present themselves when stocks in cyclical companies get sold down during business cycle downturns. The net asset value is only a safety backstop for the stock if those assets can be realized at full value should worst come to worst. The investor thus needs to take a critical look at the probable value of the assets should they be sold.

After a chapter on international investing and one on biotechnology companies (with a more general point of always taking into consideration if the company have the prospects of being bought up), Kramer finishes off with further thoughts on analysis of small cap stocks. To find the ‘breakout’ stocks she’s searching for one has to look for signs of improvement. It’s change in company fundamentals, not absolute levels, which will drive positive or negative change in stock prices. As a general rule Kramer however wants her companies to be profitable and to have low debt levels to provide security should the investment backfire. She also wants to understand reinvestment needs and the operating leverage of companies as measured by the proportion of fixed and variable costs. Further she looks for accounting red flags and management insider trading to gain insights. The selling process is trickiest when it comes to loosing positions. The question deciding the course of action is “are you wrong or just early?”, i.e. have you missed a negative factor in the analysis, have things changed to the worse and or is fundamentals improving and the case is thus still intact?

This book gives solid advice and it does its job for the novice, but there is very little detail. As a matter of fact this review probably covers most of the book’s content.

[Jack · Rating 2 out of 5]

I thought this would be about small cap stocks. Although included, it is really about buying low priced shares. The idea is that stocks costing less than $10/share may not be considered investment grade. Fund policies may not allow mutual fund managers to buy them so they may be undervalued. . Low priced shares may include classic value stocks, growth stocks, "fallen angels" etc. Screen for low prices stocks then read the 10Qs and 10Ks and analyze the stocks to decide which ones to buy. I have not doubt that this works for the author but I don't think the book prepares the reader to be able to do it. There is a linked website but I didn't try it.

[Priyanshi Mathur · Rating 5 out of 5]

Interesting approach. Practical advice and clear steps to follow. Quite credible and felt like it was coming from someone who has actually followed this advice. The focus on overlooked, low-priced stocks is a useful angle that isn’t covered much in typical investing books. I’ll need to try the steps to understand if I can follow them and if they are actually effective.

[Andreea Olaru · Rating 4 out of 5]

An overall good book with good guidelines and real world examples, not so technical and sometimes it feels a little filled up with words. But overall it describes an interesting strategy that you could integrate into your stock picking. Worth a read👌

[Iconic Greatness · Rating 5 out of 5]

Sure, sweet and fun to read.
Know exactly how to find three types of low price stocks for potential profits.

It definitely helps because it makes you use the stock screener with more purpose and look for specific metrics.

[Linda Is on her way · Rating 3 out of 5]

3.5
concise, logical and interesting. maybe not the best book to introduce you to investing in stocks, but that's on me. since I have no knowledge about the topic I'm not sure if this book is helpful or not

[Esse]

meh

[van.derwall · Rating 4 out of 5]

หุ้นนางฟ้าตกสวรรค์ หุ้นนอกสายตา หุ้นเลหลัง

[CP · Rating 2 out of 5]

Some insights. But so so at best

[Gijs Limonard · Rating 3 out of 5]

Free on audible, short listen; some good points if this is your preferred cup of financial markets tea; on investing be sure to check out: The Intelligent Investor, The Most Important Thing: Uncommon Sense for the Thoughtful Investor and Cryptocurrency Investing For Dummies.

[Sergio · Rating 5 out of 5]

The Little Book collections are always an easy read and brings expert advice to beginner's. I enjoyed this book because it gave me unconventional advice in how I should approach investing. I liked how open and honest Hilary Kramer was with her investment approaches and how to question oneself when buying/selling a stock. I say this because there are many books out there that give very generic advice because they don't want to be held accountable for investors losing money from their advice.

The reason is that a lot of investors will just go along with the book and not think for themselves. I think this little book was great in putting out an approach and then following up with a game plan to execute. For example trying to understand how to find small stocks by going through SEC, understanding that P/E ratios and PEG's dont really mean anything.

What I don't like about this book is that Hilary Kramer makes getting the information easy to get. As she noted in her book she has a vast network of people giving her information. This is ultimately the reason why she is able to hear about these investment opportunities that regular people would never hear of. I think that investing is ultimately about knowledge and the more people you have in your network and also doing the homework on researching the company the better your chances of success in investing. She also said - most of the insider analysts will have the information way before the public will know of it (she happens to be one of these people). Therefore it might be a little difficult on our part to have the kind of successes that she had in the past.

[Jacob · Rating 3 out of 5]

This is an easy read that is somewhat interesting, although the author is too cheerleader-ish in her descriptions of her successes. She tries to make up for it at the end by issuing repeated warnings, but more examples of failure and why they failed would help more. Although this book is pitched as "here's my approach - you can do it too!", it's pretty clear that the author's extensive experience in examining the fundamentals and even more her network of contacts in certain areas provides the edge she receives in picking stocks. In addition, several mistakes slipped through the editing process, which is never impressive ("a rise in the increase of oil could hurt your portfolio"? I think increase is not the right word there).

At the same time, the author does provide firm numbers that she implies she uses to screen stocks, which is more than most authors. There's an accompanying web site too for further information, although currently it's pretty unresponsive and slow (as of the time I read the book at wrote this review).

[Terry Koressel · Rating 4 out of 5]

This book exceeded my expectations, which admittedly were low. Low-priced stocks are an inherently risky class of securities made worse by an entire unscrupulous industry which developed to rob unknowing investors of their money. But Hilary Kramer stands out. In fact, the premise to her low-priced stock strategy is that the "bad name and reputation" of this equity class make the hidden gems more valuable. Her book focuses on the small percentage of under-$10 stocks that represent good, sound (though still risky) value. She is honest about the effort required....it is work to find these few value investments amongst the thousands of low-priced stocks. She offers an excellent blend of strategy and technique. The read is fast, but she did not skimp on the coverage of her investment strategies. I recommend the book.

[Karen Zhang · Rating 5 out of 5]

The author made her point very clearly at the very beginning of the book, which is there are plenty of opportunities to invest in under-researched, under-covered small stocks. I don't know how true it is that biotech industry has a lot of these stocks, but I agree with her main idea that institutional investors tend to neglect opportunities in this space, and small stocks can go up much faster than large-cap stocks. The other takeaways is how important primary research is and how you can leverage people with industry expertise around you to do deeper research. For these small stocks to work, you just need to get one thing right.

[Aly Mawji · Rating 4 out of 5]

Ms. Kramer's book explores the topic of small cap value stocks. Her thesis is that institutional investors shy away from small cap stocks, especially those trading in the single digits (below $10). She asserts that if you are able to dig through the rubble you can find some true gems. Specific example companies discussed include Darling Ingredients (DAR), Popular (BPOP), Dendreon, Ford Motor Co.(F), Priceline (PCLN), Cabela's (CAB) and Dole Foods. Broad categories of stocks discussed include fallen angels, undiscovered growth companies, and bargain bin issues (trading below book value) as well as biotech/medical small caps and emerging market companies.

[Kevin Demel · Rating 2 out of 5]

An interesting book for small investors but even though she gives out a lot of info, it will still be a lot of work to set up an investment plan using her method. But I can see why there is an opportunity in small stocks since not a lot of analysts are following them. They may be too small for a lot of large money managers to take a position in.

[Kristen · Rating 4 out of 5]

This book is a great read for anyone looking to learn more about stocks in general. It specifically speaks about low priced stocks and when and why one should buy.