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, eight companies passed the screen:
|
Company |
Market Cap (in millions) |
Business |
Add to Your Watchlist |
|---|---|---|---|
|
AeroVironment |
$661 |
Aerospace and defense |
|
|
Altisource Portfolio Solutions |
$1,023 |
Real estate management and development |
|
|
CVD Equipment |
$94 |
Semiconductors and semiconductor equipment |
|
|
Hi Tech Pharmacal |
$433 |
Pharmaceuticals |
|
|
IPG Photonics |
$2,269 |
Electronic equipment, instruments, and components |
|
|
Mercadolibre |
$3,764 |
Internet software and services |
|
|
SolarWinds |
$2,164 |
Software |
|
|
Twin Disc |
$480 |
Machinery |
Source: S&P Capital IQ.
New stocks on the list this month are AeroVironment, Mercadolibre, and Twin Disc. Dropping off the list from last month are Financial Engines, Gulfport Energy, Interactive Intelligence, Transcend Services, and Virtusa.
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% |
29.3 |
24.8 |
12% |
9% |
|
Altisource Portfolio Solutions |
26% |
24.4 |
20.6 |
45% |
16% |
|
CVD Equipment |
24% |
0.0 |
9.9 |
9% |
9% |
|
Hi Tech Pharmacal |
21% |
11.5 |
12.1 |
29% |
22% |
|
IPG Photonics |
26% |
45.1 |
90.4 |
31% |
25% |
|
Mercadolibre |
12% |
67.8 |
60.2 |
39% |
26% |
|
SolarWinds |
22% |
40.9 |
26.9 |
32% |
33% |
|
Twin Disc |
25% |
25.9 |
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 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).
