This article is part of our Rising Star Portfolios series.
Over the next couple of days I'm going to once again be searching for small-cap stocks for my "multivitamin" portfolio using my Foolish 8 and Modified Foolish 8 screens. The first company I bought from these screens, lululemon athletica (Nasdaq: LULU), is up 30% since I prepared my first article and 13% since my official recommendation. (That's how it goes sometimes; you just can't hurry the research.)
Let's start off with this month's Foolish 8, developed by 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
Eight companies passed the screen this month:
|
Company |
Market Cap (Millions) |
Business |
Add to Your Watchlist |
|---|---|---|---|
|
China Biologic Products (Nasdaq: CBPO) |
$421.5 |
Biotechnology | |
|
eMagin (AMEX: EMAN) |
$183.6 |
Electronic manufacturing | |
|
GSI Technology (Nasdaq: GSIT) |
$264.3 |
Semiconductors | |
|
Interactive Intelligence (Nasdaq: ININ) |
$644.0 |
Application software | |
|
IPG Photonics |
$2,509.4 |
Electronic manufacturing | |
|
LogMeIn |
$949.4 |
Internet software/services | |
|
Puda Coal (AMEX: PUDA) |
$325.9 |
Coal mining | |
|
ZAGG (Nasdaq: ZAGG) |
$226.6 |
Electronic accessories |
Source: Capital IQ, a division of Standard & Poor's.
Biggie smalls
By rule, I'm not allowed to buy sub-$200 million companies for my portfolio, so eMagin is out. Here are some important metrics for the remaining candidates:
|
Company |
Insider Ownership |
Forward P/E |
EV/FCF (TTM) |
ROE |
Net Margin |
|---|---|---|---|---|---|
|
China Biologic Products |
43% |
36.2 |
15.9 |
51% |
24% |
|
GSI Technology |
18% |
26.8 |
41.3 |
18% |
20% |
|
Interactive Intelligence |
25% |
26.4 |
30.1 |
18% |
9% |
|
IPG Photonics |
26% |
33.7 |
68.9 |
11% |
12% |
|
LogMeIn |
10% |
48.2 |
40.2 |
18% |
21% |
|
Puda Coal |
33% |
7.8 |
10.3 |
20% |
7% |
|
ZAGG |
32% |
63.4 |
184.8 |
39% |
12% |
Source: Capital IQ, a division of Standard & Poor's.
P/E = price-to-earnings ratio; EV = enterprise value; FCF = free cash flow; TTM = trailing 12 months; ROE = return on equity.
We already know a bit about Puda Coal and ZAGG since they showed up in the December F8 screen, and I talked about their good and bad aspects in separate articles. ZAGG is up 14% since showing up on my screen, while Puda is down 4%. 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. So don't forget to come back to www.fool.com tomorrow.
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. Until tomorrow!
