From the Editor: We've been showing you Sid's research this week because he uncovered a new way to make money. So now that you've seen the charts, let's start looking at the "sparks." Sid just outlined all seven in his Small-Cap Rocket Alert. Here's the first...
It goes without saying that a company that secures a large, new contract with a key vendor can see its stock really take off. The contract can come by way of a larger private-sector customer or a public sector contract with any number of government entities.
At the end of the day, it doesn't matter where the contract comes from. What does matter is the scale of the contract relative to the company's existing sales.
For instance, giant defense contractors such as Lockheed Martin Corporation (NYSE: LMT), The Boeing Company (NYSE: BA), General Dynamics Corporation (NYSE: GD), and Raytheon Company (NYSE: RTN) frequently announce new government contracts worth hundreds of millions of dollars. That's great. But it isn't going to really move their stock price. That's because it may take years to realize the total value of the contract, and even then, relative to the company's existing sales - already in the billions - the new contracts aren't game changers.
On the other hand, small companies, like the one's we'll be targeting in Small-Cap Rocket Alert, can see their top lines explode when they secure a key contract.
Take Cirrus Logic Inc. (Nasdaq: CRUS), for example. The company makes audio chips used in Apple-branded mobile devices like the iPhone and iPad.
At the end of fiscal year 2009, the company had a market cap of approximately $200 million. It reported sales of $174.64 million and net income of $3.48 million.
And then they experienced the Apple effect...
By the end of fiscal 2013 the company's market cap had exploded to approximately $1.47 billion. Sales and net income changed dramatically, too, popping up to $809.79 million and $136.60 million, which represent increases of 363.7% and 3,825.3%, respectively.
More importantly, though, CRUS stock exploded. Shareholders saw a 1,044% gain from January 2009 to January 2013.
I'm already on the hunt for dynamic small-cap companies, like Cirrus, with new key contracts in the works. These could be a fantastic source of profits for us. Stay tuned...
[Editor's Note: To learn more about Sid's new research service, click here.]