"Run for the exits. Sell it all. The Dow is falling and nothing can stop it. The markets are on the verge of a significant correction and many investors are left wondering what’s next."

Give me a break. Up until Tuesday, the Dow was humming right along and every investor was relishing in that delusional genius feeling that only a bull market can provide.

But now more than ever, it’s time to exercise caution. When I say caution, I don’t mean halving your holdings and buying some T-bills until everything gets sorted out. No, now is the time to buy… but buy the right stocks, of course.

But which one are the right stocks? I’ve been keeping a very close eye on one small company that has amassed more 100,000 paying subscribers in its first three months. And it’s being courted by the likes of Sprint, Verizon Wireless and AT&T. In addition, it raised $5 million in seed capital from some of the world’s most successful investors. I’ll explain more about this tiny start-up in a second.

It is companies like these that survive every correction and quickly rebound after sell-offs are the ones to own. Even a bear market can’t hold back growth like that.

There are a lot of ways to find these types of stocks, but you’ll never find it on any stock screener or in any Wall Street Journal editorial.

One of the best places to find the stocks that will get you feeling like a genius again is right in Silicon Valley. The novelty may have worn off, but we’re in the midst of a tech revolution. The garish promises from the dot-com era are finally coming true and there are great investment opportunities popping up every couple of weeks.

But sorting out the good from the bad isn’t easy. That’s why you have to look at who’s providing the seed capital that is helping to get the next YouTubes and Googles off the ground.

That’s why I always keep an eye on what Sequoia Capital is up to. The elite Silicon Valley venture capital firm has an uncanny ability to see into the future. Its crystal ball has led it to invest in the extremely early stages of both YouTube and Google and dozens of other stunning successes including Electronic Arts, Cisco Systems, Paypal, 3Com, PMC Sierra… the list goes on and on.

Sequoia always seems to be involved in the next big thing long before anyone else. And that track record has made this small group of venture capitalists worth keeping in your sights.

Now, Sequoia is moving onto its next big project and we’ve already begun to see this small company reach the mainstream. This small company, Loopt Inc., is already attracting a lot of attention from the business community.

It’s a pretty basic idea. Loopt’s founder, Sam Altman, was sitting in class at Stanford University and realized everyone was sending text messages to each other on their cellphones. An avid text messager himself, Altman realized the message he sent most often to his friends was “Where are you?”

The single “eureka moment” sparked Loopt, which provides a social mapping service through small cellphone service provider Boost Mobile. Social mapping uses GPS technology to allow all your friends to keep tabs on your exact location.

And in three short months of launching its product with a nominal cost of $3 a month, Loopt is now used by more than 100,000 paying customers. Considering Boost Mobile has only 4.3 million subscribers, that’s pretty impressive. But Boost Mobile just doesn’t have the same massive customer base as the big boys in the cellphone service industry.

Two weeks ago, that all changed. Loopt announced it had secured a deal with Sprint Nextel to be offered to the major cell phones companies subscribers. Keep in mind, Sprint Nextel has 56 million customers, more than 10 times that of Boost Mobile. So if Loopt is just as successful with Sprint Nextel as it was with Boost Mobile, the social mapping service provider could easily have 1.3 million new paying customers.

And that’s the kind of growth that makes winning investments, regardless of whether the bears or the bulls are ruling Wall Street.

Loopt is just going to be another winner in the stable of Silicon Valley start-ups that got the cash they needed from Sequoia Capital. Regretfully, Loopt isn’t publicly traded; however, Sequoia does have a few other small hyper-growth companies that are available for public investment. Among the ones worth a look are digital media support outfit Avid Technology (AVID:NASDAQ) and wireless security firm Aruba Networks (ARUN:NASDAQ).

Although Sequoia’s involvement with Loopt doesn’t help us in our search for the right stocks directly, the fact that the firm has been getting highly involved in the GPS market is a very good sign of what’s coming down the road. After all, the early financiers of Google, YouTube, Cisco Systems, Paypal and 3Com simply don’t make too many mistakes. And GPS is one of their next big bets.

But don’t worry; the company I’ve uncovered isn’t just another fly-by-night tech company. Just like Sequoia was an early investor in coming successes like Loopt, tech heavyweights Dell, Nokia, Intel and Matsushita were all involved very early in the formation of my top GPS play which you can learn a lot about here.


Andrew

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