You may remember the days, not so long ago, when putting as much money as you can into small cap stocks was a fad among investors.

It worked like crazy for a while... with many people dumping every penny they had into small caps and making huge returns quickly as a result of it.

But soon the markets started falling and the small cap game became a lot, lot harder.

Under-prepared and under-informed investors could no longer take small caps casually like they used to. And many of them found this out the hard way when they lost money awfully fast in small cap stocks.

Simply put, for most investors the game was up.

Soon cries echoed from all across the investment community about how "Small Caps are Dead", "Small Caps are Worthless" and "Small Caps are Finished"...

And they probably had a point. The game had gotten a lot harder.

But...

While most people were busy complaining and griping about this, some investors had knowingly or unknowingly discovered the secret to making 1,000% or more returns from small caps... and they were silently working their way towards it.

These investors were totally unfazed by the market changes because they knew they’d earn their profits regardless of whether the market went up, down or remained flat.

As you may know already, small caps have performed poorly in the last few months. And it has unfortunately led many investors to the conclusion that the 15 minutes of fame for small companies are over.

This is far from the truth!

The continued fall in the prices of small caps was triggered by a panic sell-off that started in the broader market due to the impact of financial crisis in the US.

So, ALL small cap stocks across ALL sectors had crashed without discrimination.

Second... while small caps fall fast in general, they also rise equally fast.

Here are some randomly selected Small Caps stocks that prove this point (one stock we recommended is also in there)...

Clearly, small companies are fast growers and it shows in their stock prices. And the best part is... small caps have the potential to be 10-baggers also!

Some of the unique advantages of owning small cap stocks are:

1. Small companies adapt fast to changing environment - they are nimble and can therefore move fast

2. Given low liquidity, while retail investors can buy small caps, many fund managers cannot - so retail investors like you have a first mover advantage with a good small company

3. Small caps are high in demand but less in supply - that means prices rise really fast when demand increases

However, there is one drawback when it comes to small caps..

Smaller companies typically have fewer competitive advantages and financial resources to weather a market downturn. So, naturally, when there is a sell-off in the markets, small caps bear the brunt of it as they are more "risky" to hold.

And because of the size of small caps, it doesn’t take much money to drive their stock prices down faster.

You might have been told by others that it's the best thing to do right now.

But my answer to that would be - No, definitely not!

You see, while most stock brokers and investment firms push small caps as a way to make big returns in a short time, we believe they're as an extremely good "long term" investment.

Small caps have been proven to post better returns over the long run than large caps - returns often in excess of 1,000% over a 10-year period.

You don't have to take my word for it. Here are some real examples...

Small cap wonders

Market cap. (US$ m)	Then	Now	Returns	Sector
Pantaloon Retail (India) Ltd.	1.6	526.1	32,798%	Retailing
Matrix Laboratories Ltd.	2.3	272.4	11,681%	Healthcare
Mercator Lines Ltd.	1.3	133.7	10,141%	Shipping
Havells India Ltd.	2.8	136.8	4,848%	Consumer / Electricals
Sintex Industries Ltd.	18.4	382.4	1,977%	Plastic / Textiles
Blue Dart Express Ltd.	9.8	202.2	1,961%	Logistics
Hindustan Construction Co. Ltd.	12.2	232.6	1,809%	Construction
Blue Star Ltd.	24.3	273.7	1,025%	Engineering Services
Titan Industries Ltd.	86.4	838.4	870%	Retailing / Durables
Pidilite Industries Ltd.	65.8	501.1	661%	Diversified

Source: CMIE Prowess and Trend; Then - 31st December 1998; Now - 30th January 2009

Let's say you had invested just Rs 15,000 in Hindustan Construction back in 1998. You'd have easily made almost Rs 286,422 by now.

 If you had invested Rs 15,000 in Pantaloon then, you'd have made around a whopping Rs 4,934,694 now! 

So, adding a few small-cap stocks in your investment portfolio is one of the surest ways to multiply your wealth...

But "profitable" doesn’t necessarily mean 327% returns in one week.

We have always said and still say that you should look at small caps from the long term perspective.

The stocks we recommended through Hidden Treasure are strong companies and we recommended them not because we believe they will flourish in a year or two, but over a period of 4 to 5 years.

No doubt, the market pressure is going to keep the small caps down for some more time.

Still, if you buy the stocks that we recommend right away... for dirt-cheap, you can expect them to deliver good returns over the recommended timeframes.

So this is an opportunity to...

These companies have grown rapidly in the last decade to become household names today.

But there was no way you could have known... until now...

Through Hidden Treasure we're providing you opportunities like that today.

The stocks we reveal through Hidden Treasure are companies that are either under-researched or not covered by other stock brokers and research firms.

There's no other authentic source of long-term recommendations on such companies. And whatever else is available is biased.

I know that small caps don't comprise a big portion of your portfolio. Probably 10% at the most.

But that doesn't mean you don't need to bother about them at all.

This small part of your portfolio does the KEY job of maximizing your returns...

We have done even better!

The results of 7 of the 12 small cap companies we recommended are in line with our estimates so far. This has been achieved in an environment which has not been good for business.

The other companies recommended by us have also done well, though not in line with our projections.

We continue to believe that over the recommended investment horizon they will deliver the performance we were expecting to begin with.

But if even that doesn’t convince you, here’s something that will...

You probably know of our Large Cap recommendation service Stockselect.

Stockselect has a great track record since 2002. Even the recently recommended stocks have done very well.

That’s why we have MANY Stockselect subscribers who have been with us since the day we launched it. Here’s what one of them has to say...

"I realized the value of fundamentals only after I started using Equitymaster" I am a subscriber to these services for the past five years. I realized the value of fundamentals for investment decisions only after I started using the services of equitymaster.com. Earlier, my decisions used to be based on "tips" or "advice from friends" etc.; Equitymaster taught me to base them on business fundamentals. One very good quality of your organization is that I never have even 5% of doubt about your unbiased approach and your integrity to the retail investors. Overall, I value the services offered by Equitymaster and I acknowledge their contribution to make my investment decisions more scientific. - Satish Pendse, a StockSelect Subscriber

Now the thing is...

 We follow similar practices to decide on valuable small cap stocks also. 

Hidden Treasure is only one year old now. So I’m sure that by the time it has completed 4-5 years, we will have similar testimonials for it also.

Stockselect subscribers get one large cap recommendation EVERY WEEK. Then why only one Hidden Treasure per month?

It’s because good small companies are extremely difficult to find and Equitymaster analysts have to go through many more hoops to find the few gems that exist... just for you.

And get this - it's OUR reputation at stake here.

To make sure our recommendations are accurate, we also have to meet with the managements of different companies and organise trips to various cities every month.

All this takes time, therefore just one report a month.

So what I'm saying is... we will continue to find hidden treasures that have capabilities to make attractive returns for you in the future.

But considering the risks that small companies carry, you should realistically not expect each and every recommendation to be an out and out winner.

Agreed?

 Rs 5,000 per year equates to about Rs 420 per month or Rs 14 per day.

Seriously, this is way less than what you spend on all the phone calls to your broker, the money you pay to watch the noise on your television, and all the newspapers and magazines you buy hoping to find good investment opportunities.

And none of these can provide you unbiased and reliable small cap recommendations like Hidden Treasure.

By subscribing to Hidden Treasure you get...

a. One Small Cap recommendation per month - reports are easy to understand, delivered to email as PDFs, accessible online 24 hours a day
b. Quarterly results review of all recommendations
c. Performance review every quarter
d. Frequent updates on recommend companies

For instance, if you're nearing retirement or have already retired, I don't recommend putting all of your retirement money into small caps.

Small caps are for those who have an appetite for risk.

While you can make a lot of money in small caps quickly, you can also lose a lot of it quickly. That's why you have to choose wisely and constantly monitor your small cap investments.

Last but not the least...

We also conduct Equitymaster webinars from time to time with renowned Stock Market experts. By subscribing to Hidden Treasure, you can get FREE access to future webinars.

In fact, we had conducted our last webinar very recently... on 16th March, 2009 at 5.30 PM.

The title of the websummit was "Where are the Stock Markets headed?" And the guest speaker for the event was Ajit Dayal, the founder of Equitymaster and the Mumbai-based investment advisory firm, Quantum Advisors.

Ajit is a well known investment advisor who has managed global equity portfolios and India-dedicated portfolios.

During the websummit, he talked about the likely route the markets could take in the years to come, and the course of action YOU need to take to survive and profit in these tough times.

 Subscribe to Hidden Treasure now and you can download the recording of this event absolutely free.

On the Contrary, if you had signed up for the websummit separately you would’ve had to pay Rs. 1,990 for it.

You can sign up to Hidden Treasure through one of the links below.

You can pay Rs 5,000 for a year’s subscription to Hidden Treasure.

Or even better, you can sign up for two years straightaway and pay Rs 8,000 only (that’s Rs 2,000 off!).

The choice is yours...