April's Five Best Performing Financial Small-Cap Stars

Jacob Harper |

In January 2013 Equities.com devised the Small-Cap Stars project, wherein our analysts began tracking a set of companies worth between $50 million and $1 billion that they felt had a higher-than-average chance of sporting high returns. After the Small-Cap index beat the Russell 2000 last year, the analysts revised the Small-Cap stars in January 2014, settling on 398 stocks.

The stocks were isolated using sector-specific criteria. For today, we diecided to look at the small-caps included in the Financial sector.

  • Price/Book Value (P/BV) Ratio (Negative): The price to book value ratio measures the relationship between the price of a share of stock in the company and the book value per share. It's considered a measure of the stock’s value relative to its peers. For financial stocks this makes sense, overvalued financials have likely already grown to their potential. It is, again, not an industry that places a premium on high valuations.
  • Value/Book Value of Capital: While the previous relationship considered the value of the stock price to BV, this relationship is mainly concerned with the value of the company’s equity and interest bearing debt. A financial institution holds a tremendous amount of both debt and equity on its balance sheets, and, if those assets are worth more in the market than on their balance sheets, they are a stronger institution.
  • 3 Year Standard Deviation: A measure of volatility using the three-year mean of the stock. The positive relationship indicates that stocks with more volatility in the financial sector are more likely to gain, however this should be considered along with the other metrics.
  • Fixed Assets/Total Assets (Negative): Banks do not make their money off of fixed assets, so a higher ratio would indicate a poor use of their money.
  • Market Debt to Capital: Financial companies typically engage in higher leverage (more debt), but this is usually a sign of a healthier institution, oddly enough. A bank must be more solvent in order to engage in greater leverage, so the positive relationship makes sense because higher leverage means more profits.
  • - See more at: http://www.equities.com/equities-small-cap-methodology#sthash.Ze4GHG8B.dpuf
  • Price/Book Value (P/BV) Ratio (Negative): The price to book value ratio measures the relationship between the price of a share of stock in the company and the book value per share. It's considered a measure of the stock’s value relative to its peers. For financial stocks this makes sense, overvalued financials have likely already grown to their potential. It is, again, not an industry that places a premium on high valuations.
  • Value/Book Value of Capital: While the previous relationship considered the value of the stock price to BV, this relationship is mainly concerned with the value of the company’s equity and interest bearing debt. A financial institution holds a tremendous amount of both debt and equity on its balance sheets, and, if those assets are worth more in the market than on their balance sheets, they are a stronger institution.
  • 3 Year Standard Deviation: A measure of volatility using the three-year mean of the stock. The positive relationship indicates that stocks with more volatility in the financial sector are more likely to gain, however this should be considered along with the other metrics.
  • Fixed Assets/Total Assets (Negative): Banks do not make their money off of fixed assets, so a higher ratio would indicate a poor use of their money.
  • Market Debt to Capital: Financial companies typically engage in higher leverage (more debt), but this is usually a sign of a healthier institution, oddly enough. A bank must be more solvent in order to engage in greater leverage, so the positive relationship makes sense because higher leverage means more profits.
  • - See more at: http://www.equities.com/equities-small-cap-methodology#sthash.Ze4GHG8B.dpuf

For the financial sector, the analysts looked for stocks that had a certain set of fundamentals, notably a negative price-to-book value ratio, a negative fixed asset to total asset ratio, and a positive market debt to capital ratio, among others.

After applying the methodology specific to the Financial sector to all the Financial small-caps on the market, our analysts found 92 plays worthy of inclusion.

Of those, five of them returned over 10 percent in the month of April alone. Those stocks are:


Maui Land and Pineapple Company (MLP)

Price: $8.02

P/E: N/A

30 Day Return as of May 1, 2014: +22.07 percent


Imperial Holding Inc. (IFT)

Price: $6.92

P/E: 2.84

30 Day Return as of May 1, 2014: +20.98 percent


Community Bank Shares of Indiana (CBIN)

Price: $26.31

P/E: 11.90

30 Day Return as of May 1, 2014: +17.35 percent

 

Republic First Bancorp Inc. (FRBK)

Price: $4.42

P/E: 147.33

30 Day Return as of May 1, 2014: +14.81 percent

 

Employer’s Holdings Inc. (EIG)

Price: $22.54

P/E: 11.27

30 Day Return as of May 1, 2014: +11.92 percent

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
EIG Employers Holdings Inc 37.40 0.25 0.67 43,475
IFT IFT n/a n/a n/a 0
FRBK Republic First Bancorp Inc. 7.90 -0.20 -2.47 344,488
MLP Maui Land & Pineapple Company Inc. 7.00 0.00 0.00 209
HSTH Hs3 Techs Inc 0.00 0.00 0.00 0

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