Small-cap stocks can be an attractive investment opportunity, as they stand a much larger chance of experiencing astronomical growth than a more stable, less volatile mid or large cap. However, with that volatility comes increased risk. Even in a sector as historically popular with investors as consumer goods, small-cap investments need to be chosen wisely.
Looking for statistically meaningful correlation between small-cap success and small-cap bust out, Equities.com’s research team has created the Small-Cap Stars project.
In their research, the research team identified five significant metrics for identifying strong consumer goods stocks. They are companies that meet benchmarks set in these categories:
- Firm Value: This barometer gauges the size and longer-term health of the business.
- Reinvestment: This metric measures how much of the company earnings are invested back into the business, except this figure is not standardized for company size.
- ROIC: High return on invested capital means that management is spending money wisely to grow the business.
- Capital Expenditures (Negative): Consumer goods is generally not a capital-intensive industry, so a number above average could indicate that the company is not spending their money efficiently.
- Fixed Assets/Total Assets: A ratio indicating what portion of the company's total assets are tangible long-term assets. A higher ratio suggests more stability.
And here are the best performing YTD Small-Cap Consumer Goods Stars:
Kandi Technologies Group (KNDI) The best-performing of the Equities.com Small-Cap Stars, Chinese electric vehicle maker Kandi Technologies has popped this year as green products continue to take hold in the public consciousness. Kandi scored a major win just a few days prior, as the Chinese government announced subsidies for electric carmakers.
Kandi is up 96.71 percent on the year.
Hyster-Yale Materials Handling (HY) This company designs and manufactures lift trucks (AKA forklifts) and aftermarket parts under two brands names – Hyster; and Yale. Hyster-Yale IPOed in 2012 after it was spun off from Nacco Industries (NC) , a company that has been in business for one hundred years.
Hyster-Yale is up 83.86 percent on the year.
Electronics for Imaging (EFII) This Forster City, Ca.-headquartered company manufactures parts for color digital printers. The company roundly beat earnings per share expectations in the second quarter of 2013, and will post third quarter earnings before the bell on Oct 17.
Electronics for Imaging is up 73.04 percent on the year.
Federal Signal (FSS) Security alarm maker Federal Signal has been in business since 1901. In addition to making alarms and other security devices, its various subsidiaries manufacture a wide array of industrial cleaning products, notably sewer cleaners, water blasters, and industrial vacuums.
Federal Signal is up 68.41 percent on the year.