Investors who are looking for that tiny materials play with good upside potential will need more than a great deal of patience if they hope to pick the right stock before anyone else does.
Indeed, companies with market-caps under the $2 billion small-cap threshold are notoriously difficult to assess by the usual fundamental and technical metrics, but this does not mean that stock-pickers are without recourse. A good place to start, however, can be to follow the smart money, given that financial institutions have, at least in theory, the kind of knowledge and expertise that is not commonly available to the institutional investor.
The following five stocks were selected from the basic materials sector, based on the following criteria:
? Market-capitalization under $2 billion.
? High insider ownership: having over 30 percent of shares owned by employees, this is likely a sign that the company believes in itself.
? Institutional transactions over 20 percent, meaning that the so-called “smart money” has increased its position in the company substantially over the past 3 months.
? Positive 2014 performance
New Concept Energy Inc. ($GBR)
Industry: Independent Oil & Gas
Market-Cap / Price: $3.89 million / $2.07
Insider Ownership: 54 percent
Institutional Ownership / 3-Month Increase: 0.10 percent / +100 percent
Year-to-Date Gains: +9.90 percent
China Precision Steel Inc. ($CPSL)
Industry: Steel & Iron
Market-Cap / Price: $9.66 million / $3.30
Insider Ownership: 33.40 percent
Institutional Ownership / 3-Month Increase: 1.20 percent / +82.12 percent
Year-to-Date Gains: +81.75 percent
China Gengsheng Minerals Inc. ($CHGS)
Industry: Nonmetallic Mineral Mining
Market-Cap / Price: $13.94 million / $0.53
Insider Ownership: 56.87 percent
Institutional Ownership / 3-Month Increase: 0.90 percent / +53.45 percent
Year-to-Date Gains: +147.62 percent
Kingold Jewelry Inc. ($KGJI)
Market-Cap / Price: $115.16 million / $1.80
Insider Ownership: 45.20 percent
Institutional Ownership / 3-Month Increase: 1.10 percent / +82.07 percent
Year-to-Date Gains: +6.55 percent
Chesapeake Granite Wash Trust ($CHKR)
Industry: Oil & Gas Pipelines
Market-Cap / Price: $522.20 million / $11.16
Insider Ownership: 34.50 percent
Institutional Ownership / 3-Month Increase: 7.60 percent / +37.82 percent
Year-to-Date Gains: +11.40 percent