When the markets were down, these stocks outperformed by a long shot

Some individual tiny companies march to their own drum. This is particularly true of some stocks that rapidly rise when the rest of the market is falling. One example is a Bowser hall-of-famer (if we had such a thing): ZAGG Inc. (ZAGG); and the other is a more recent Bowser success story: Alpha Pro Tech (APT).


We often talk about ZAGG, and why not? It was one of our top picks of all-time. ZAGG found its way into the newsletter in December 2008 while it was trading for $0.93 a share. The company rode Apple's (AAPL) increasing popularity by manufacturing and selling protective cases for their and other companies'  electronics products.

From June 30, 2008 to June 30, 2009, ZAGG Inc.'s price rose from $0.67 to $6.90 a share, a 930% gain.

ZAGG Outperformance Chart

ZAGG from June 30, 2008 to June 30, 2009

At the same time as ZAGG's huge appreciation, the S&P 500 fell 28.2%, the Russell 2000, 26.3%, the Dow Jones Industrial Average, 25.6% and the NASDAQ Composite, 20%. The overall market was feeling the effects of the 2008-2009 financial meltdown.

Despite the overall financial climate, ZAGG soared.

Alpha Pro Tech (APT)

APT has been in and out of The Bowser Report over the years. Most recently, we recommended the company in November 2013 while it was trading for $1.73 a share. One of Alpha Pro Tech's business segments engages in the manufacture and sale of face masks and eye shields to prevent the spread of infection.

With the recent news surrounding the Ebola epidemic, APT's stock took off. From September 12, 2014 to its closing high on October 13, 2014, Alpha Pro Tech.'s stock soared 282%, from $2.63 to $10.05 a share.

APT Outperformance Chart

APT from September 12, 2014 to October 13, 2014

Meanwhile, the overall market was having trouble. The Russell 2000 fell 9.6%, the NASDAQ Composite, 7.8%, the S&P 500, 5.5% and the Dow Jones Industrial Average, 3.9%. The markets, which had been fairly stable, returned to volatility, making their way downward as well.

Despite the market climate, APT nearly quadrupled in price.

There are two major reasons that these companies were able to soar, even though the markets were down. First, they both operate within a unique, high-demand niche. ZAGG's products were sought after to protect people's new devices, while APT's protective masks and eye shields were in high demand because of the Ebola scare.

Second, their low prices and daily trading volumes increased leverage. Both companies were below $3 per share, with ZAGG trading at below $1. Meanwhile, APT traded an average of 122,000 shares per day, and ZAGG was trading an average of just 33,000 shares per day. Then, their volumes skyrocketed, APT's to over 6,000,000 and ZAGG's to over 300,000. The increased buyers led to the increased prices, and the stocks doubled, tripled and more.

Both APT and ZAGG declined after their shares jumped. However, using the Bowser Game Plan would have yielded huge profits. The Game Plan suggests selling 50% of holdings at double the purchase price, and the remaining 50% after the shares dropped 25% from their most recent high (via a trailing stop). So, costs are covered by the first sale, ensuring a considerable profit.

The secret formula to finding companies that can outperform down markets is simple. We look for profitable companies, trading for less than $3 per share. These companies often operate within a unique niche and trade at relatively low volumes. So, once Wall Street discovers them, their prices take off, yielding enormous profits, even when everything else seems to be going down.

*Charts from Yahoo! Finance