While most investors tend to focus on large and stable companies with decent growth prospects, some investors only seek out undiscovered stocks that have the potential to double, triple or even quadruple your investment.

The companies underpinning such potential gains are often known as “game-changers” because they possess a new technology that can completely alter existing industry dynamics. My colleague, Andy Obermueller, who pen’s StreetAuthority’s Game-Changing Stocks, has shown an uncanny knack for revealing such companies over the years.

Yet as you seek out such companies, don’t just focus on their income statements. Instead, keep a close eye on the company’s levels of cash. The best time to own such stocks is often right after the balance sheet has been bolstered.

Let me give an example. Back in September 2013, I saw huge potential upside for Novavax, Inc. (Nasdaq: NVAX), which had been developing a range of treatments for various viruses. Considering that this stock had moved sideways in prior years made it seem foolish to predict robust imminent upside. But Novavax did something that instantly changed sentiment. It raised a lot of money. 

Novavax typically finished every year with $30-to-$40 million in the bank. Investors rightly understood that an inability to raise more money might one day lead to this company’s failure. The fact that Novavax’s cash on hand now exceeds $150 million means that investors can be comfortable knowing that it will survive until it’s game-changing virus biotechnology reaches the market.

It works the other way as well. If a company has let its cash balance dwindle, investors will start to sell shares, waiting to buy again when fresh capital has been raised.

That may be happening with Mazor Robotics Ltd. (Nasdaq: MZOR), an exciting young Israeli company with a revolutionary robotic spinal surgery system. Andy Obermueller has been recommending this stock since 2012, which has delivered great gains for investors. As Andy saw it, the company’s FDA approval gave it first-mover advantage in the market for robotic spinal surgery, and “the size of the opportunity is significant — about twice that of hip replacements, which is a $7 billion business in its own right.”

Mazor has started to gain the industry buzz Andy anticipated. Sales surged to $20 million in 2013 from $6 million in 2011 and should exceed $30 million by 2016, according to analysts. That kind of growth fueled heady share price gains — for a while at least. 

But this stock has recently plunged more than 50%, trading hands below $13.

#-ad_banner-#Investors may be expressing concern about the balance sheet. In the fourth quarter of 2013, Mazor raised fresh capital and had roughly $64 million in the bank. But Mazor has continued to burn cash to support a growing business, and cash balances are now eroding. There is considerable industry buzz that Mazor will need to raise more money later this year. Yet when that happens, you’ll want to pounce, as investors will no longer be concerned about the balance sheet.

Let me cite a third example of a potential game-changer that is not quite ready for your investment dollars. Ekso Bionics Holdings, Inc. (OTC: EKSO) has gained first-mover advantage in the field of exoskeletons, which can be used in healthcare (to help paraplegics gain mobility) or in battle-field environments. As the company notes on its website, “Exoskeletons are ready to wear, battery-powered robots that are strapped over the users’ clothing, enabling individuals to achieve mobility, strength, or endurance not otherwise possible.”

As you’d expect, developing such a product doesn’t come cheap. Despite the fact that sales are starting to grow, the company is still burning through $4-to-$5 million every quarter, and only has around $20 million in the bank right now.

When Ekso finally reloads the balance sheet, shares are likely to take a brief hit, as the company’s investment bankers snare an attractive package of warrants and options for themselves. But that would create the perfect entry point for the stock, as subsequent dilution concerns will have been greatly reduced.

Risks To Consider: Such companies possess robust growth prospects, but sales force execution is key. Mazor Robotics, for example, has delivered a series of disappointing quarters, at least relative to very high expectations. Ekso Bionics, for its part, still needs to convert a promising technology foundation into a large and meaningful sales base.

Action To Take –> Whenever you are reaching small companies that have yet to generate profits, you need to study the balance sheet closely. Whenever cash balances reflect less than a year’s worth of cash consumption, it’s wiser to step aside and wait for the inevitable balance sheet reload. That’s an especially important consideration in the biotech sector. A large number of young biotech firms performed an IPO in the last 12-to-18 months, and many of them will need a capital injection within a few quarters. Put them on your watch list, and be ready to pounce once the capital has been raised.

As I mentioned above, my colleague Andy Obermueller devotes his time to identifying game-changing companies like Mazor and Ekso. More recently, Andy has been talking about the threat that cyber criminals pose on individuals, multinational corporations and even governments. This is a serious problem, in its infancy and one that will take decades to fight. But don’t let this scare you. Andy has identified four companies that specialize in protecting sensitive information from criminals. These are young firms, providing robust upside potential for early investors. If you haven’t heard about this opportunity yet, then I urge you to check out his comprehensive report on how to profit from the world’s greatest threat, by clicking here.