One of the questions I’m frequently asked is what are the best investment sites to find good small-cap stocks. Usually, the person inquiring is hoping I’ll divulge a specific website that offers up a steady stream of inspirational ideas—for free! Each time, I explain what readers of Cabot Wealth Daily already know: there is no such website.
Of course, for a few bucks a day, investors can grab a subscription to Cabot Small-Cap Confidential, and have all my best small-cap ideas sent right to them. But you already know that too.
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Today, I thought I’d do what’s difficult to do in conversation but easy to do in writing: lay out what I consider to be the best investment sites for small-cap investors. These are the websites I use on a regular basis to find, research and follow up on small-cap stocks.
For the record, at Cabot we use a number of institutional-level research websites. But I’m not going to get into those given the relatively high cost. For a website to make today’s list, it must be 100% free. I have no affiliation with any of these websites and don’t receive anything for mentioning them. Neither does Cabot.
I’ve broken my list up into three areas that define the basic research process. These are (1) idea generation, (2) stock analysis and (3) idea capture and performance tracking.
Best Investment Sites for Small-Cap Idea Generation
Best Investment Sites for Stock Screening
When looking for stocks with very specific characteristics, a screening tool works best. To be effective, your criteria needs to be specific enough to weed out the riffraff, but broad enough to pull in enough results to give you something to work with.
For instance, a simple screen I like looks for stocks within a market cap range, say $200 million to $600 million, with 20% revenue growth and 20% EPS growth over the last 12 months, and with a share price over $2.00.
My website recommendation on this front is a little lame since I use a paid for screening service regularly. But in the past, I’ve relied on screeners from Yahoo! Finance, Google Finance, Zacks and Finviz. Each has pluses and minuses that are too numerous to mention. Reputable online brokers have screening tools too that might be even better.
Best Investment Sites for ETFs and Mutual Funds
Another good source for idea generation are ETFs and mutual funds that already have predetermined criteria that approximate yours. The websites above will work for researching funds. But I think there are better sources available.
For finding ETFs, I use the research tab on XTF.com. You can specify a number of variables and then compare the ETFs that the website returns. When you want to dig deeper into the ETF, the XTF website allows you to see the 10 biggest holdings for free. To get the rest, you need to be a premium subscriber. But a quick workaround is to simply go the website of the ETF issuer and find a downloadable file of all index constituents. Ideally you can get this in Excel format so you can sort the data by column (for instance by market cap) to help speed up your analysis.
The Morningstar.com funds page is also a great fund research resource, and I use it for sifting through mutual funds. Some of the tools require you to register (for free), but once that’s done, the depth of information is significant (a premium subscription is available too). One of the nice things about many small-cap mutual funds is they don’t have a ton of stocks in them, so it’s a relatively quick process to look inside and pull out any names that strike your fancy. Again, you’ll need to go the specific fund’s website to get a downloadable file of all holdings since Morningstar limits your access to the first 25 holdings.
Best Investment Sites for Getting Creative
Many of the best small-cap investment ideas come from random sources. A conversation, a passing glance at something or a magazine article. A lot of things can set off alarm bells that inspire you to find stocks to play the trend.
This approach requires a completely different tool than your standard stock screener. The best free tool I’ve found is the SEC’s advanced full-text search tool. The tool lets you search SEC filings by keywords, then gives you a list of all filings in which that keyword has shown up over the last four years. It’s worth reviewing the tool’s FAQ page to understand how the search works so you can generate relevant results. For instance, if you search for “cloud software,” you’ll get a gazillion results with stocks all over the market cap spectrum. But if you search for “cloud AND software AND biotechnology,” and limit the filings searched to 10-Ks, you’ll get results that are much more specific to a certain concept.
Idea generation for small-cap stocks is inherently time consuming. Make sure you know that going in, and set aside a reasonable amount of time. And remember, the more specific your search criteria is, the faster you’ll be to find relevant results.
Best Investment Sites for Small-Cap Stock Analysis
Once you have a dozen or so stocks that seem intriguing, you need to dig deeper. Is it a buy now? Maybe a buy later? Or a no way in hell am I touching this thing! You need to do a little technical and fundamental analysis to figure it out.
Best Investment Sites for Technical Analysis/Charting Tools
There are so many charting tools out there that you’ll have no problem finding a good free one (if you haven’t already). But speed is critical, and I find that the more windows I have open the longer it takes me to move through stock analysis. This is especially true when using a lot of free websites that are supported by advertisements that slow things down. I almost always go with the fastest website that gets the job done and presents the chart clearly. Two options stand out.
The first is stockcharts.com, which is a pure technical charting tool. It’s my favorite.
The second is interactive charting tool on the I-Metrix website. The homepage shows all the new SEC filings for that day, but if you click on the “Company” tab and enter your ticker symbol of choice, you’ll be directed to the company’s “Summary” page, which gives you the company’s basic info. In the upper right, you’ll see a little chart image. Click on it and you get a nice clean charting tool. The nice thing about this website is it also provides the basic company info for free, as well as access to recent SEC filings, all in one ad-free spot (the left sidebar has the navigation menu, and all items without a lock icon are free).
Best Investment Sites for Fundamental Research
The key to quick fundamental research is clean data presentation. Of the usual suspects—Yahoo! Finance, Google Finance and Seeking Alpha, I prefer Seeking Alpha since its financials page seems faster than the other two.
I have yet to find a good, free resource that includes nicely lined up financials with horizontal analysis (year-over-year and quarter-over-quarter percentage changes for financial statement line items) and vertical analysis (income statement line items as a percentage of total revenue, for instance). I believe this is something you need to pay for (or try your online broker, if you use one). Horizontal and vertical analysis are extremely helpful additions to straight-up financial statement analysis.
Morningstar.com has a decent way of presenting this data for a reasonable subscription fee (and you get a lot more from the subscription too).
SEC Filings, Transcripts and Company Presentations
If a stock passes my high level technical and fundamental analysis check, I’ll add the stock to my “do more research” list. When I do more research, I rely on four sources. The first is SEC filings like 10Ks and 10Qs. These have all the juicy details on the company, including what it does and how well it’s doing it, what the risks are, details on financial performance and all kinds of other information. I usually find these in one of three locations; the company’s Investor Relations website, directly from the SEC.gov Company Filings website or from I-Metrix (select “All Filings” from the left-side navigation bar).
Two other useful resources for valuable tidbits are earnings call transcripts and company presentations. Seeking Alpha is a great source for free earnings call transcripts (search by ticker first then select the “Earnings,” then “Transcripts” tab. And if you navigate to the Investor Relations website for most publicly traded companies, they’ll have a recent company presentation available that gives a decent overview of what they do and their financial performance. These websites will also have a replay of the most recent earnings conference call available if you want to listen to it.
Lastly, I think it’s handy to see what analysts that are following a stock are saying. I find MarketBeat.com Analyst Ratings to be a good free resource for this. You have to close a couple of pop up adds, which gets annoying. But you can enter the desired ticker symbol and the site will tell you what the current analyst ratings are, and often what their price targets are. And of course, the “Analyst” tab on Yahoo! Finance is good for looking at analyst estimates in terms of dollar value and growth rate for the current quarter, next quarter, current year and next year.
Small-Cap Stock Idea Capture and Performance Tracking
Managing Your Files and Watch Lists
Once you have a number of small cap stocks you’re interested in, you need to capture your research so you can follow-up on the stocks quickly and be ready to buy when you (and the stock) are ready.
First things first: dump all your downloads (SEC filings, presentations, etc.) into a company-specific folder on your computer so you don’t need to search the web for them again and again (I know this sounds obvious, but I think a lot of people fail to do it).
For really quick and efficient stock monitoring, you can’t beat a web-based watch list. Your online broker will have a tool for this. But the option I use the most is the “Portfolio” tool from Google Finance. The key when setting up your watch list is to enter the date, the price of the stock on that date and a theoretical number of shares, so you’ll have a cost basis. I always use $1,000 as the theoretical position size. Just divide $1,000 by the share price, and you’ll get the number of shares. Enter that (you can enter the fractional amount for precision) and you’re good to go. Break up your watch lists by theme, market cap or whatever seems to make sense to you. As time goes by, be sure to cull the “losers” that you’ve lost interest in. And you can probably delete the “winners” too since you’ve likely bought them!
Hopefully, I’ve presented a few resources and/or processes here that are new to you and which can help you find and research small-cap stocks.
Another option is to forget everything I just wrote and use the best single website there is for small-cap stocks. That is the website for Cabot Small-Cap Confidential! I do all the legwork for you and tell you what the company does, why it’s different from the competition, how well it’s doing, what the risks are and how much upside the stock has. If you have a question on a stock I follow, or any other stock for that matter, you just email me and I’ll answer your questions. All for less than the price of a daily latte!
So if you prefer to skip the digging and research and just want to know the details on the best small-cap stocks in the market, consider a subscription to Cabot Small-Cap Confidential today. The average performance of all open positions (+94% as of this writing!) is well ahead of the small-cap index over the same timeframe. And I have a list of additional candidates that have a good chance of beating the market in the years ahead.
Tyler Laundon is chief analyst of Cabot Small-Cap Confidential. The circulation of Small-Cap Confidential is strictly limited because the undiscovered stocks with sky-high-potential that Tyler recommends are often low-priced and thinly traded. Don’t share these recommendations!Learn More
*This post was originally published in April 2017 and is periodically updated.