The third quarter was enough to put most sensible investors on the sidelines, but now is not the time to sit on your hands, says Louis Navellier of What’s Working on Wall Street Now.

Economic concerns remain on center stage and have created a weary investment environment. Many investors are sitting on the sidelines, waiting for the next breakthrough in the market, because they don’t have a clue where to go or what to do next.

They’re going to once again find themselves behind the trends, unless they take action now.

Because the next big breakthrough is just mere weeks away in the form of third-quarter earnings season. And after the difficult times the market experienced during the third quarter, it is more than ready to be lifted by positive earnings reports.

If you are looking for a way to best take advantage of the pops expected of earning season market behavior, then you need to begin turning your attention to small-cap stocks.

Earnings season is the time for stocks to really shine…and none more than the small-caps. Emerging companies relish earnings season, because the stakes are high and the buying interest enticed by a positive report can easily send stocks with a small market cap through the roof.

It’s why earnings seasons are my favorite times of year. It’s during these times of the year that we gain a clear picture of our investments’ worth and potential.

The three companies I’m going to highlight below show just how much potential you can expect with smart investments in small-cap stocks—especially during the earnings seasons.

Majesco Entertainment Company (COOL)
This company develops games for Sony’s PlayStation, Microsoft’s Xbox and Nintendo’s Wii game systems, as well as games for personal computers.

The company is originally known for action titles such as BloodRayne, Black & Bruised, and Blowout, but more recently made headlines with the very popular Zumba Fitness video game for Wii.

Majesco Entertainment has made a critical shift in 2011, and investors can’t get enough of the stock. Majesco moved its development efforts to lower-priced value offerings. This strategy gave the company its first profitable quarter in 12 months.

When the company announced its latest second-quarter earnings figures a few months ago, they annihilated analysts’ estimates. The company posted a 250% earnings surprise and 170% earnings growth for the quarter! These were absolutely tremendous results.

The stock is expected to continue its quick growth, with analysts expecting 250% growth for the current quarter.

3D Systems Corp. (TDSC)
This company makes products that are used by businesses to conceptualize and design products. Such well-known companies as Bose, Ford, Hasbro, Northrop Grumman, and Porsche use 3D Systems devices.

In the second quarter, sales totaled $55.1 million, a sizable 57% boost from last year’s $35.1 million. And it gets even better: both net income and earnings per share exploded over 300%!

This quarter’s net income weighed in at $13.4 million, compared with just $2.7 million in the second quarter of 2010.

Similarly, adjusted EPS was 26 cents per share this quarter versus 6 cents per share last year. Earnings per share thrashed the consensus estimate of 15 cents, yielding a whopping 73% earnings surprise!

Jazz Pharmaceuticals Inc. (JAZZ)
This is an innovator in the specialty-pharmaceutical space, with two commercially-successful products on the market with rising sales.

Last quarter, Jazz’s earnings were boosted by the sale of its drug, Xyrem. Earnings grew from $10.5 million, or 28 cents per share, to $38.4 million, or 82 cents. This represents a phenomenal 266% jump in net income and a 193% spike in earnings per share!

Analysts were expecting 77 cents per share, so JAZZ posted a 7% earnings surprise. Investors were elated with this news, and drove the price of JAZZ up by over 13% on announcement day!

This is just a small sample of the amazing activity you can expect from small-cap stocks during the next earnings season.

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