Investors looking to add small-caps to their portfolios are faced with a dizzying array of choices, and finding the right match can sometimes feel more like looking for a needle in a haystack. For reasons that are often quite justifiable, small-cap companies have a reputation for being more risky; they are more far more exposed to volatility than their larger peers, and even the best management team can experience great difficulty in generating the kind of cash that will pave the road to bigger and better things.
Be that as it may, the potential for growth and the fact that even the best small-caps often remain overlooked and undervalued by the market is an attraction that larger stocks can for the most part not hope to offer to shareholders. The investor’s predicament in this instance is how best to evaluate such equity prospects in order to make the right choice.
And it is with just this predicament in mind that Equities.com has recently been kicking its Small-Cap Stars series into high-gear. Small-Cap Stars is proving to be an excellent tool that can help investors separate in the substantial undertaking that is separating the wheat from the proverbial chaff.
Take the Industrial Goods sector as an example. For industrials, global economic conditions have made 2013 a bumpy ride, with China’s growth spurt beginning to pace itself, Europe just now limping its way out of recession, and the many skeptics still not convinced of the US housing market’s recovery.
Using fundamentals in order to navigate small-cap industrials in such a climate requires as solid and intuitive an understanding of the relevant data as possible. Thankfully, Equities.com’s own analysts are in possession of just such an understanding of the fundamentals, which they have mercifully translated into the stock-screener that is the core of the Small-Cap Stars project.
The full methodology underpinning the entirety of the Small-Cap Stars can be found here. For those who need proof, however, the following is a sample of what sort of stocks are currently receiving a five-star rating, the highest that the Small-Cap Stars screener can provide:
Gorman-Rupp Co. (GRC)
Market Cap: $826 million
Price: $39.35
Quarterly Performance: +33 percent
Deltic Timber Corp. (DEL)
Market Cap: $842 million
Price: $66.90
Year-to-Date Return: -5 percent
Ducommun Inc. (DCO)
Market Cap: $324.50 million
Price: $30.39
Year-to-Date Return: +88 percent
Gulf Island Fabrication Inc. (GIFI)
Market Cap: $372.27 million
Price: $25.75
Year-to-Date Return: +8.60 percent
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