First you need to do some research on the area of small caps you are interested. You need to pick an area that you are familiar with,electronics,retail,over the counter stocks. Try and stay in a area of small companies that have great profit potential. You can use a stock screener to help narrow your search. Most stock brokers will have a small cap stock screener that you can use. You can set the share price you want to start out with You can set the profits and sales revenue criteria and so on. A stock screen will be a huge help finding the right small cap stock to buy.
Set yourself some kind of plan on what type of companies you would like to look for. The first place is to look at a combines earnings. Many of the stock brokers will have a ranking on the earnings power a small company will have. They will provide you with the earning outlook and how the company has done in the last few quarters. Look to see if the business has growth potential. Some companies have suffered in a bad economy but could turn around when things improve. Make sure to check there earnings per share when the economy is booming.
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