Friday, April 2, 2010

Looking for value stocks in a market that has moved up? Look to Small Cap stocks

Dow Jones 10,927.00 (Up) Week ending 04-02-2010

Things were feeling a little bit "toppy" in the market this week as it appears investment managers are feeling safe and they are loading up their portfolios with quality stocks. So I decided to go back to my January 30th blog post to see if those small cap stocks that had been the percentage gain leaders at the end of January 2010 had continued to perform well and if any looked like a good buy at this point. LTX-Credence (Symbol LTXC , $2.91) looked like they were the best positioned to continue to do well this year. They had just done a secondary offering at $2.85 a share to pay off some debt. It looks like this will be their first year of consistent earnings. I actually purchased some of this small cap stock.
Houston American Energy Corp. (symbol HUSA , $19.69) is both a small cap and an oil company from that list, but it is just too expensive to purchase at this point here with a PE of 130.

The next stock is the casual shoe maker Crocs Inc. (Symbol CROX, $8.78). Crocs has a nice balance sheet with a quick ratio of assets to liabilities of 3 to 1. Earnings are growing at 18+ % per year. Kids are always losing these shoes or leaving them somewhere, so they always need replacements. I would consider CROX a buy here.

The next small cap stock is Culp Inc. (Symbol CFI, $11.69) the textile company which had shot up all the way to $16 and change and has now backed down to an acceptable purchase price. It appears they will produce earnings per share of 83 cents this year and 98 cents per share in 2011. I consider them reasonably priced here. I should mention that these are small cap stocks and are higher beta. Meaning that you don't want to "bet the farm" on any one of them because they can go up and down very quickly. Small Caps have less shares traded daily so all activity is magnified and can have dramatic affect on the stock price. So use small purchases of small caps to add a kicker to your portfolio.

One other stock on that list was Libbey Inc. (Symbol LBY, $12.67) a maker of glass tableware in Delaware. Annual Earnings of 60 cents in 2010 and $1.13 per share in 2011. So with a couple of analyst buy recommendations on it and a nice little spurt in earnings, it looks like you can put a trade on here in LBY.

The other stocks I mentioned in the January 30 blog were Bare Escentuals (Symbol BARE), Mindspeed Tech (Symbol MSPD) up 34.75% in January 2010 and Radio One Inc.(Symbol ROIA). Of these I like Mindspeed Tech the best because of its earnings outlook.

So be wary in this "toppy" market and add a small cap to spice up your portfolio a bit.



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