These 3 Micro-Cap Stocks Could Double in 2013: CPST, ABHD, DSCI

With the market moving ever higher, investors are "moving out on the risk curve." This means the positive price action is beginning to spread to more speculative stocks -- small- and micro-caps.

Indeed, investors can score stunning gains in the micro-cap arena -- if they pick the right stocks.

Of course, whenever you focus upon stocks with significant potential upside, it's wise to keep your enthusiasm in check. The "swing-for-the-fences" approach can be quite rewarding, but it also brings increased risk of an occasional flameout. That's why a basket approach is best. But by owning several speculative plays, with each comprising less than 5% of your portfolio, you may be richly rewarded.

 

Here are three micro-cap stocks that could generate significant gains in the year ahead.

1. Capstone Turbine (Nasdaq: CPST)
Roughly a decade ago, this company was expected to revolutionize the power-generation industry. Its micro-turbines held the promise of providing off-the-grid power back up for many factories. They were also seen as a potential savior for remote villages in countries like India, where electricity was still scarce or even nonexisiting.   

Capstone's shares briefly moved above $80 in late 2000, but after a decade of operating losses, shares now trade below $1. In fact, the company generated positive gross margins for just the first time in its history in fiscal (March) 2012.

Yet gross margins are finally starting to move up meaningfully, hitting 9% in the company's fiscal second quarter ended September. When fiscal third-quarter results are released on Monday, Feb. 11, gross margins should reach double-digits for the first time. Analysts at JMP Securities expect gross margins to rise to 13% in the company's current fiscal fourth quarter. (more)

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