Investing in MicroCap Stocks

Now we are going to talk about an example of a great stock that we found with our stock screener in December of 2004. The stock is aQuantive, Inc. (NASDAQ: AQNT) during that time, the stock was suspended near its fifty two week low and was getting beaten up pretty badly. Using our screening parameters, we liked what we saw in AQNT. News for this stock was acceptable, cash to debt ratio was satisfactory, and message board traffic for AQNT was good. This stock has performed very well over the past year, making gains of over 180%.

Here is an example of a stock that we found with our screener that did not do so well during the past year. The stock is Leadis Technologies, Inc. (NASDAQ: LDIS). When this stock appeared on our screener we liked what we saw. The stock was recovering from a recent downtrend and had some decent numbers. We took a position in the stock in late December of 2004. Within a few weeks of getting into this stock it decides to tank. We cut bait and sold a large portion of our holdings for a loss in January. As time passed, we were kicking ourselves for not selling our complete position. The stock continued to decline over the next three months before stabilizing in April. When LDIS stabilized and seemed to form a new base, we averaged down and picked up some supplementary shares. From May to early July, the stock enjoyed a nice recovery but unfortunately tanked again in late July. We were hoping to get out of this stock with limited losses so we sold our entire position in June in the midst of LDIS's short recovery. We still took a loss on this stock, but it turned out to be less than what it could have been had we held.