- (0:45) - Small Cap Hidden Gems: Stock Screener
- (5:25) - Tracey’s Top Stock Picks: ZAGG, TALO, IMMR, MEET, COHU
- (15:10) - Takeaways on Small Caps
- (17:45) - Episode Roundup: Podcast@Zacks.com
Welcome to Episode #93 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
The small cap stocks have taken the lead in 2018. It’s been several years since the small caps have broken out before the large caps. It’s usually the other way around.
For value investors, that means this is an opportunity to buy small cap value stocks which have historically been the best performers among equities.
But where do you even look for “good” small cap value stocks?
Screening for Small Cap Value
There are simply too many small cap stocks. It’s vital for investors to use a screen to narrow it down. Tracey used a forward P/E of 15 and a market cap of $1 billion, to get the basic small cap value stocks.
But she also added the Zacks Ranks of #1 (Strong Buy) and #2 (Buy), which will likely produce rising earnings estimates as well. And that means there may also be earnings growth.
If you’re going to buy value, why not get some growth in there too?
The combination of value plus earnings growth is pretty rare but it makes for a powerful combination.
With all of those qualifiers, the screen returned 88 stocks, including a lot of smaller, community banks and several home builders.
Out of that screen, these 5 stocks stood out.
5 Small Cap Value Stocks (Some with Big Growth)
1. ZAGG Inc. ZAGG makes protective coverings for electronics under the Invisible Shield brand. It has a market cap of just $450 million. Shares are cheap with a forward P/E of 11.5. But the big growth is there with earnings expected to rise 42% in 2018.
2. Talos Energy TALO just merged with Stone Energy in May 2018 so it will be bigger than the screen allows (i.e. it will be above a billion dollars). But who doesn’t like small cap energy right now? Talos operates in the Gulf of Mexico and the Gulf Coast. Stay tuned for more on the earnings outlook once the analysts have the chance to drill down. Prior to the merger, the shares were cheap with a forward P/E of 9.3.
3. Immersion Corp. IMMR makes touch feedback technology. It has a market cap of $392 million. The company is dirt cheap, with a forward P/E of just 6.5. Earnings expected to rise 307% this year. It has a PEG of just 0.4.
4. The Meet Group MEET owns a mobile app portfolio that allows for meeting new people. It’s most popular app in the US is MeetMe while Lovoo takes the honors in Europe. Livestreaming video has taken off, as has revenue. First quarter revenue rose 88% year-over-year to $37.6 million. The company has a market cap of only $230 million. It has a forward P/E of 13.
5. Cohu Inc. COHU is a supplier of semiconductor equipment. In the first quarter, it reported that it captured 2 new large customers and has solid order momentum. It has a market cap of $679 million. Cohu has attractive valuations with a forward P/E of 13.7 and is expected to grow earnings by 11.7% in 2018 and another 18% in 2019.
Remember, small cap companies are lightly followed on the Street. That means there is less information on them.
Be sure to do your homework before any investment, but certainly with small cap companies.
What else should you know about investing in small cap stocks right now?
Tune into this week’s podcast to find out.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cohu, Inc. (COHU): Free Stock Analysis Report
MeetMe, Inc. (MEET): Free Stock Analysis Report
Immersion Corporation (IMMR): Free Stock Analysis Report
ZAGG Inc (ZAGG): Free Stock Analysis Report
Stone Energy Corporation (TALO): Free Stock Analysis Report
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