“I think this company is going to make a killing…”

My brother, an acute businessman and owner of a construction firm, recently told me he was thinking of putting a few grand into a small, relatively unknown company. It trades over-the-counter and sells workout powders, like whey protein.

#-ad_banner-#His comment wasn’t a comment at all, though. It was a veiled question: should I proceed with the investment? He was looking for validation.

I was familiar with the company and its products. My brother and I even knew one of the founders.

But it didn’t take me long to prove that this was a bad investment.

I asked my brother, “Would you go into business with this guy on a housing project?”

“Absolutely not,” he said, almost immediately. “The guy was sued by the Food and Drug Administration in his previous endeavor, and he isn’t someone that I would want to partner with… ever.”

It’s a funny thing. My brother understands real estate, construction — business, in general. But throw him a ticker symbol, and his judgment is clouded. Instantly, everything he knows about business is forgotten, and he acts like a tourist at a Vegas roulette table, slapping a few grand on 30-red.

Buying one share of a company is the same as a co-venture on a construction project, but on a smaller scale. You are buying a piece of that firm.

Owning stock puts you in business with management. You are trusting that they’re competent, savvy and — most importantly — not going to screw you over.

Posing that simple question to my brother deterred him from buying shares. Recently, a lawsuit was brought against the company, in addition to a handful of others, for cutting protein supplements with cheap fillers and falsely labeling them as high-grade protein. Some products contained only 19 of the 50 grams of protein the packaging listed.

The stock plummeted more than 50% following the news.

My point is: if you want to invest in a company and make money in the process, then you need to build a deep understanding of the business, its market, its management, any headwinds that might slow it down and any tailwinds that could propel it higher.

Put simply, successful investors understand the businesses that they buy.

Too often, average investors become mesmerized by the market’s hysteria in search of the one winner that will rain money on them for life.

Instead of being an investor, most people, in actuality, are traders with poor execution. They buy stocks they don’t understand, at unreasonable prices, and when the trade turns south, they sell low.

That is why the majority of investors will never get rich in the stock market.

I don’t tell you this to scare you away from looking for new investments. On the contrary, familiarizing yourself with new companies in various industries is a great way to diversify your portfolio and limit your overall exposure to the stock market.

Take small-cap companies for example.

They’re an easily forgotten and often-overlooked investment. What you might forget is that much like a human, businesses grow the most in the earliest years of development.

And investing during the early stages of a company’s life cycle is a great way to earn outsized gains, as long as you’ve done your research.

For example, a few months ago I told readers of my premium advisory Maximum Profit about a little-known company called Cynosure, Inc. (Nasdaq: CYNO).

The company makes and markets medical devices for aesthetic procedures and other surgical applications worldwide. Its flagship product, PicoSure Picosecond Laser Workstation, has become the industry standard for removing tattoos and benign pigmented lesions.

At the time I recommended CYNO, the company was sitting on more than $113 million in cash, with just $14 million in debt.

Cynosure also had managed to continue its growth in both North America and the Asia Pacific, where it saw revenue grow by 17% and 46%, respectively. That growth resulted in a $31 million net profit — or a 10.7% profit margin, its highest in more than a decade.

With plenty of cash on hand, steady profits and a $35 million share repurchase program in place, I told my readers that Cynosure looked to be firmly in the driver’s seat for future growth.

Sure enough, since my recommendation, shares of the company have grown 34.5% and don’t look to be slowing down anytime soon.
 

For comparison, shares of CYNO had only grown about 12% in the two years prior to my recommendation.

That’s what the Maximum Profit system is designed to do — find stocks entering “profit cycles” so you can earn bigger gains in a shorter amount of time.

Among others, Maximum Profit has an entire portfolio dedicated strictly to small-cap firms. One, in particular, is nearing a triple-digit return since the system flagged it as a “buy.”

In January 2015, the company sported a market capitalization of just $203 million. Since then, that market cap has nearly doubled, and shares have soared 91.5%. All in just six months.

I can’t give you the stock’s name right now, but I can tell you this…

It’s not too late to put this system to work for you. It’s been carefully designed and tested to identify stocks with potential for market-beating gains in less time than normal “buy and hold” investing.

But the process doesn’t stop there. Like the lesson I taught my brother, after the system recommends a buy, I tear apart the company. I analyze its financials, familiarize myself with the management team and construct a list of headwinds, tailwinds and future expectations. Only once it’s won my approval do I recommend a security to my readers.

To explain how everything works, with examples to spare, I constructed a Maximum Profit beginner’s guide. It should take you less than 10 minutes to review.

Click here to access the Maximum Profit beginner’s guide now.