Not many investors can afford to buy 1,000 shares of Apple (AAPL) at $120. For the rest of us, there are always small-cap opportunities in stocks that are $10 or less.
According to trading expert Jamie Dlugosch it’s easy, if contrarian, to find small-cap stocks that can be huge gainers, using a system based on the PE gap.
The PE gap is the difference between a stock’s price-to-earnings ratio and its expected profit growth rate.
If it’s negative, buy the stock. If it turns positive, sell the stock.
Annually, Dlugosch picks 100 to 150 stocks attractive to the PE gap methodology.
“There are a lot of small cap stocks,” Dlugosch says. “The idea for stocks under $10 is we use the PE Gap to identify the most attractive under $10 stocks, and then follow some very simple rules.”
Here are those simple rules used to identify the most attractive small-cap stocks under $10….