This article is part of our Rising Star Portfolios series.
I'll be gathering more small- and mid-cap candidates for my Rising Star "multivitamin" portfolio over the next few days via my Foolish 8 and modified Foolish 8 screens. Today I present the Foolish 8, which was developed by Motley Fool co-founder David Gardner to identify profitable, rapid-growth, small-cap stocks. Here are the eight criteria:
- Revenues: $500 million or less.
- Earnings and sales growth: 25% or greater.
- Net profit margin: 7% or greater.
- Daily dollar volume: $1 million to $25 million.
- Insider holdings: 10% or greater.
- Share price: $7 or greater.
- Relative strength: 90 or greater.
- Operating cash flow: a positive number.
The contenders
This month, 11 companies passed the screen:
|
Company |
Market Cap (in millions) |
Business |
Add to Your Watchlist |
|---|---|---|---|
|
AeroVironment |
$672 |
Aerospace and Defense |
|
|
Altisource Portfolio Solutions |
1,184 |
Real Estate Management and Development |
|
| Bank of the Ozarks |
$945 |
Commercial Banks |
|
| CVD Equipment |
$88 |
Semiconductors and Semiconductor Equipment |
|
|
Epoch Investment Partners |
$562 |
Capital Markets |
|
|
Gulfport Energy |
$1,904 |
Oil, Gas, and Consumable Fuels |
|
|
MercadoLibre |
$4,177 |
Internet Software and Services |
|
|
Nanometrics |
$411 |
Semiconductors and Semiconductor Equipment |
|
| SolarWinds |
$2,405 |
Software |
|
| Transcend Services |
$283 |
Health Care Technology |
|
|
Twin Disc |
$454 |
Machinery |
Source: S&P Capital IQ.
New stocks on the list this month are Bank of the Ozarks, Epoch Investment Partners, Gulfport Energy, Nanometrics, and Transcend Services. Dropping off the list from last month are Hi Tech Pharmacal and IPG Photonics.
Biggie smalls
Here's a look at some interesting metrics for these small fries:
|
Company |
Insider Ownership |
Forward P/E |
EV/FCF (TTM) |
ROE |
Net Margin |
|---|---|---|---|---|---|
| AeroVironment |
16% |
21.4 |
18.7 |
14% |
11% |
| Altisource Portfolio Solutions |
26% |
13.6 |
22.5 |
45% |
16% |
| Bank of the Ozarks |
16% |
14.7 |
NM |
28% |
52% |
| CVD Equipment |
24% |
23.1 |
12.2 |
14% |
11% |
| Epoch Investment Partners |
32% |
23.0 |
24.0 |
36% |
30% |
| Gulfport Energy |
17% |
14.6 |
NM |
27% |
46% |
| MercadoLibre |
12% |
43.3 |
66.9 |
39% |
26% |
| Nanometrics |
19% |
27.6 |
21.0 |
32% |
24% |
| SolarWinds |
22% |
29.4 |
26.2 |
32% |
33% |
| Transcend Services |
12% |
17.6 |
40.1 |
18% |
11% |
| Twin Disc |
25% |
14.7 |
NM |
21% |
8% |
Source: S&P Capital IQ. P/E = price-to-earnings ratio; EV = enterprise value; FCF = free cash flow; TTM = trailing 12 months; ROE = return on equity; NM = not meaningful because of negative or negligible FCF.
Tomorrow I'll show you the results of this month's modified Foolish 8 screen and then talk about the companies that interest me from both screens in more depth.
If you're interested in keeping up with any of these companies, add them to your free watchlist by clicking the "add" button in the far-right column of the top table. You can also follow me on Twitter and check out the multivitamin discussion board.
This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).
