Promising Small-Cap Stocks, the Sequel
Small stocks, which have lagged blue chips for several years, were riding at an 11-month high on June 30 when Market Savvy featured a screen for investors interested in lesser-known companies.
For the small-stock sector overall, summer brought a downtrend--as in the market in general.
But our portfolio has surged in the last three months, gaining 15.6% on average, as the accompanying chart shows.
The Russell 2,000 index of smaller stocks, by contrast, has lost 5.4% in that period, while the Standard & Poor’s 500 index of bigger stocks has eased 1.9%.
We asked Zacks Investment Research to update the screen, again ranking the 10 best stocks with less than $1 billion in market capitalization based on three equally weighted criteria: net change in insiders’ stock holdings and percentage changes in analysts’ consensus earnings-per-share estimates for the current and next fiscal years--all over the last 12 weeks.
We picked those factors the first time around in an effort to find companies with strong earnings momentum (or at least shrinking losses) that might be underappreciated. Since the screen worked--for whatever reason--we kept the criteria intact.
Nine of the 10 companies on the updated list are new. Helix Technology Corp., which makes vacuum pumps used in electronics manufacturing, is the repeater.
One warning: While Helix made the cut in part based on recent insider purchases, several insiders have since filed to sell shares.
But with the stock up 341% in the last year, it’s hard to read too much negative meaning into the fact that some insiders are taking profits.
Though the new list is topped by two companies from the recently frisky energy sector, Patina Oil & Gas Corp. and Western Gas Resources Inc., a variety of industries are represented.
Hollywood Park Inc. operates casinos (it recently sold its namesake local racetrack); Charming Shoppes Inc. owns the Fashion Bug women’s clothing chain; Rural Cellular Corp. runs cell phone systems in South Dakota and elsewhere.
While the portfolio may present ideas worth further research, small caps are notoriously risky and The Times does not recommend buying or selling stocks based solely on this, or any, screen.
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Small Stocks, Big Returns
Despite the recent stock market downtrend, a stock screen featured in Market Savvy on June 30, which highlighted a portfolio of small stocks with insider buying and rising earnings estimates, has produced several winners and beaten benchmark market indexes.
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Company Ticker symbol 6/29 close Weds. close % change Price Communications PR $14.25 $25.75 +80.7% Helix Tech HELX 23.13 35.94 +55.4 Aztar AZR 8.69 10.75 +23.7 LTX LTXX 12.38 13.69 +10.6 Santa Fe Snyder SFS 8.06 8.88 +10.2 Pope & Talbot POP 11.63 12.75 +9.6 Bellwhether Explor. BELW 5.50 5.75 +4.5 Advanta ADVNB 13.63 13.44 -1.4 Commonwealth Indus. CMIN 13.25 12.75 -3.8 Longview Fibre LFB 16.81 11.19 -33.4 Portfolio average +15.6 Russell 2,000 index 454.08 429.76 -5.4 (small stocks) 4 S&P; 500 index 1,351.45 1,325.40 -1.9 (major stocks)
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The New List
Zacks Investment Research recently performed the same screen for The Times, again ranking the 10 best stocks with less than $1 billion in market capitalization based on three equally weighted criteria: net change in insider holdings and percentage changes in analysts’ consensus earnings-per-share estimates for the current and next fiscal years-all over the last 12 weeks.
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Mkt. 12-wk ’99 ’00 Ticker Wed. cap % chg. EPS EPS Rank/Company symbol close (mill.) ins hldgs. est. est. 1. Patina Oil & Gas POG $9.00 $144 +3.4% $0.06 $0.34 2. Western Gas Res WGR 17.94 576 +5.1 -0.11 0.35 3. Helix Tech HELX 35.94 802 +29.7 0.54 1.14 4. Hollywood Park HPK 17.06 445 +16.2 0.83 1.06 5. Rural Cellular RCCC 44.13 399 +31.6 -1.80 -1.18 6. CardioThoracic CTSI 16.69 241 +2.8 -0.60 0.17 7. Charming Shoppe CHRS 5.25 515 +24.2 0.32 0.41 8. Priority Health PHCC 25.13 570 +8.1 0.92 1.25 9. Ryerson Tull RT 23.00 574 +32.5 1.56 2.14 10. Evolving System EVOL 7.00 85 +141.4 -0.09 0.29
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Source: Zacks Investment Research
