We spent last Wednesday at one of our regular closed-door editor meetings here in Baltimore. These meetings are usually routine — Agora Financial editors convene in Baltimore and we debate our best investment ideas. But thanks to the current state of the markets, this particular meeting had a decidedly different feel to it.

No one has been safe during this financial meltdown. Gold is trending lower. Gas is cheap again. Commodities generally are in the dumps. Stocks are trashed. Emerging markets are crushed. Safe havens? Get outta here — there is nowhere to hide…

If there is a silver lining to the recent global selloff, it is the abundance of cheap stocks on the market right now. No, we don’t think your should borrow a massive amount of money to invest, hoping for a quick turnaround. But it is time to cautiously look at the opportunities the market presents…

Often, it is the small companies that lead the charge toward market recovery. Just take a look at what some of the market specialists are saying:

“When you look back over the last 10 recessionary environments, what tends to lead back on the upside is small-cap equities.”

— William Greiner, Chief Investment Officer of UMB Asset Management

“Like springtime crocuses, small-cap stocks flourish once the harsh cold of a bear market is over… Because small-caps are undervalued once the market turns around, they benefit disproportionately from an earnings recovery.”

— Larry Light, Wall Street Journal

Now, who knows when the bear market will end, or when the stock market will find a bottom? After the Dow’s 1,000-point rebound on October 13, we all hoped the worst was over. That rebound, however, proved to be nothing but a tease. Over the following weeks, the Dow proceeded to give back every bit of those 1,000 points.

So, at times like this, it’s nice to remember that small companies usually lead the bull charge. Because investors know that when your team is down 10 runs and you come up to bat, you don’t waste your time bunting a runner to second. You may as well swing for the fences with small companies poised for triple-digit gains…

That’s why we’ve come up with a list of penny stock plays for the growth-oriented investor. There are a lot of values to be found right now, and we’ve recently gone through and selected our favorite home-run candidates for our Penny Stock Fortunes readers.

Sincerely,
Jim Nelson & Greg Guenthner

October 27, 2008

Greg Guenthner

Greg Guenthner heads up Agora Financial’s small-cap division and is the founder of one of the only independent OTC research advisories in the industry. A graduate of George Mason University, Guenthner joined Agora in 2005 after several years as a journalist. He is managing editor of Penny Stock Fortunes and Bulletin Board Elite.

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