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No Analyst Coverage

Written By Brian Hicks

Posted November 23, 2007

We’ve spoken in-depth about two of the ten maxims of fortune: volume spikes, with an emphasis on insider buying, and trading on news. Today, let’s talk about the overlooked gems of Wall Street, the ones with no analyst coverage.

Big investment banks aren’t known for doing too much business with small-cap companies. That means their analysts aren’t covering them either, which means that their clients are missing out on real Wall Street gems.

But that’s to our advantage.

In May 2007, for example, we found LSB Industries, Inc (AMEX:LXU) trading with no analyst coverage, but involved in the explosive multibillion-dollar geothermal business. Q1 revenue had just soared 32% as EPS grew 100%.

Still, Wall Street wasn’t paying attention to the $350 million gem at $15. We did, bought at $15.50 and watched it soar to $30 months later. Analysts and their clients missed out.

Days later, we also picked up on Rick’s Cabaret Int’l, Inc. (NASDAQ:RICK). Sure, maybe analysts didn’t want to cover the operator of upscale adult nightclubs. But, again, it was to our advantage.

Here was a company with a smart CEO and strong management team, impressive earnings growth, and plans for expansion. What more did the analyst community want? Too bad they missed the run from $9 to $15. We didn’t.

Analysts and their clients missed out . . . again.

Don’t get me wrong, though. There are a ton of worthless stocks with no analyst coverage. You can’t buy just anything because of a lack of coverage. You need to make sure the company fits the ten maxims before buying.

For more information on our ten maxims and, follow this link.

Happy Holidays,

Ian L. Cooper