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5 Strong Small-Cap Stocks
The S&P 500 stock index broke out to fresh multi-month highs in early October, and a large number of investors turned their focus to the large-cap U.S. stocks. At the same time, the S&P 600 Small-Cap Index was also hitting new highs, and year-to-date has been able to outperform their large-cap peers. Through the first week in October, the index is up 9% in 2010.
IN PICTURES: 9 Simple Investing Ratios You Need To Know
Investors will often shy away from small-cap stocks because there is a perceived risk that is associated with the asset class. On the other hand, I believe the small-cap stocks carry the same amount of risk as the large-cap names, as long as due diligence is performed when making an investment decision. Lehman Brothers was a large-cap stock that did not fare so well. Also, keep in mind that Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) were once small-caps.
The Power Plays
WD-40 Company (NASDAQ:WDFC) produces and sells lubricants, hand cleaners, and other household cleaners around the globe. The company's name is their most famous product, as all of us likely have a can of WD-40 laying around the house or garage. The stock is up 20% year-to-date and is trading at an 18-month high. With a forward P/E ratio of 17.0 and a dividend yield of 2.8%, the stock could be considered a value play that can do well during good and bad economies.
Anixter (NYSE:AXE) is a diverse company that distributes equipment for the communications, security, and electrical industries, to name a few. Technically, the stock is sitting at a two-year high and has been consolidating between $54 and $56 per share. Fundamentally, the stock is trading with a forward P/E ratio of 13.2 and a price-to-sales of 0.37. Both numbers suggest that AXE is a value play with a strong chart.
PolyOne (NYSE:POL) is a provider of specialized polymer materials and services around the globe, with 2009 annual sales of $2.1 billion. The stock recently closed at the best level in over eight years, and it is on the verge of breaking through the 2002 high in the coming months. Based on the P/E ratio of 13.1 and a price-to-sales of 0.5, the stock is similar to AXE in that it is a value play with a strong chart.
Surprisingly, a real estate investment trust (REIT) that concentrates on retail properties is hitting a new all-time high. Tanger Factory Outlet (NYSE:SKT) owns 32 upscale outlet shopping centers, totaling nearly 10 million square feet. The REIT has had an impressive rally in 2010 and with the 3.2% dividend yield, it will likely continue to attract investors' money.
Sticking with the retail theme is Cato Corp (NASDAQ:CATO), a retailer of woman's apparel. During the first week of October, the company's reported September sales rose 3% and raised guidance for the coming quarter. This is a big reason the stock hit a new all-time high. Even more impressive is the forward P/E ratio of 13.6 and price-to-sales of 0.9.
Bottom Line
All five stocks are unique stories and may not fit into everyone's portfolio strategy. However, as potential investment ideas, they are worth a second glance. (For more, see The Value Investor's Handbook)
IN PICTURES: 9 Simple Investing Ratios You Need To Know
Investors will often shy away from small-cap stocks because there is a perceived risk that is associated with the asset class. On the other hand, I believe the small-cap stocks carry the same amount of risk as the large-cap names, as long as due diligence is performed when making an investment decision. Lehman Brothers was a large-cap stock that did not fare so well. Also, keep in mind that Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) were once small-caps.
The Power Plays
WD-40 Company (NASDAQ:WDFC) produces and sells lubricants, hand cleaners, and other household cleaners around the globe. The company's name is their most famous product, as all of us likely have a can of WD-40 laying around the house or garage. The stock is up 20% year-to-date and is trading at an 18-month high. With a forward P/E ratio of 17.0 and a dividend yield of 2.8%, the stock could be considered a value play that can do well during good and bad economies.
PolyOne (NYSE:POL) is a provider of specialized polymer materials and services around the globe, with 2009 annual sales of $2.1 billion. The stock recently closed at the best level in over eight years, and it is on the verge of breaking through the 2002 high in the coming months. Based on the P/E ratio of 13.1 and a price-to-sales of 0.5, the stock is similar to AXE in that it is a value play with a strong chart.
Surprisingly, a real estate investment trust (REIT) that concentrates on retail properties is hitting a new all-time high. Tanger Factory Outlet (NYSE:SKT) owns 32 upscale outlet shopping centers, totaling nearly 10 million square feet. The REIT has had an impressive rally in 2010 and with the 3.2% dividend yield, it will likely continue to attract investors' money.
Sticking with the retail theme is Cato Corp (NASDAQ:CATO), a retailer of woman's apparel. During the first week of October, the company's reported September sales rose 3% and raised guidance for the coming quarter. This is a big reason the stock hit a new all-time high. Even more impressive is the forward P/E ratio of 13.6 and price-to-sales of 0.9.
Bottom Line
All five stocks are unique stories and may not fit into everyone's portfolio strategy. However, as potential investment ideas, they are worth a second glance. (For more, see The Value Investor's Handbook)
by
Matthew McCall
Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.
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