A stock I bought last summer recently doubled. It was one of ten stocks that turned up in a screen, so I checked on how the other picks had done. Seven of the ten have beaten the S&P 500 index, and all ten are up. With a 70% win rate and no outright losers, this was worth trying again.
The objective is to identify small-cap stocks set to do well in a recovery and able to survive while waiting for it to pick up steam. The following settings were plugged in to CAPS Screener to try and repeat last year's magic:
- Market capitalization: $250 million to $1 billion
- CAPS rating: four or five stars (out of five)
- Trailing Price-to-Earnings ratio: positive and less than 20
- Long-term Debt-to-Equity Ratio: less than 1.0
- Current ratio: greater than 1.0
- Dividend yield: between 0.25 and 5% to get paid while waiting
- Positive earnings growth over the past three years. This wasn't in the original screen, but with companies reporting improving earnings, it's a reasonable hurdle.
The screen returned 19 stocks across a number of sectors. Growth projections, business description and valuation were scanned for each hit to narrow it to the 10 stocks listed below for further research.
|
Company |
LT Debt-to-Equity Ratio |
Dividend Yield % |
Price-to-Earnings (Forward) |
CAPS Rating (out of 5) |
Sector |
|---|---|---|---|---|---|
|
Aegean Marine Petroleum Network |
0.45 |
0.4% |
5.69 |
***** |
Services |
|
AZZ |
0.47 |
2.5% |
12.29 |
***** |
Industrial Goods |
|
Hawkins |
0 |
1.5% |
14.74 |
***** |
Basic Materials |
|
Littelfuse |
0.1 |
1.3% |
11.83 |
***** |
Industrial Goods |
|
PetMed Express |
0 |
2.9% |
15.72 |
**** |
Health Care |
|
PH Glatfelter |
0.7 |
2.8% |
11.46 |
***** |
Consumer Goods |
|
Primoris Services |
0.51 |
1.2% |
9.21 |
***** |
Industrial Goods |
|
The Ensign Group |
0.49 |
0.9% |
10.79 |
**** |
Health Care |
|
UniFirst |
0.14 |
0.3% |
13.24 |
***** |
Services |
|
WD-40 |
0.05 |
2.8% |
15.04 |
***** |
Basic Materials |
Source: Motley Fool screener results and Yahoo! Finance.
The only company from last summer that made a repeat appearance was Hawkins, a chemical company that happens to be my double. No debt, reasonable valuation and growing business make this a keeper. Besides Hawkins, three of the ten stocks above stood out.
Aegean Marine supplies fuel to ships. As -- or when -- economies improve, increased shipping traffic is likely to mean more business for Aegean. The stock was clobbered on a recent earnings miss; that puts the shares on sale assuming that shipping and fuel demand pick up. "Assuming" makes this pick more than a little speculative.
AZZ manufactures electrical equipment for industrial and utility applications. It also has a hot dip galvanizing business. Both operations should see increased demand as a recovery takes hold. The company trades at a reasonable 12.3 times next year's earnings estimate and pays a decent dividend.
Primoris is a construction and engineering services company serving utilities, petrochemical, energy, and municipal customers. The company has a great growth record over the past three years and is trading at only 9.2 times next year's estimates.
Like any screen, these results should be considered ideas for further research, not outright buy recommendations.
