Small-Cap Stars: Who Are the Basic Materials All-Stars?

Michael Teague  |

In an on-going effort to provide investors of all stripes with a fresh take on the most unique and compelling entry points into equities markets, has been ramping up its Small-Cap Stars series.

Indeed, Small-Cap Stars was conceived as a means of bringing greater attention to otherwise deserving companies that are often overlooked by the market, either as a result of a lack of exposure, or because investors are wary of the greater risks often associated with investing in small-caps. To this end our in-house analysts furrowed their brows, rolled up their sleeves, and put their heads together in order to determine on a sector-by-sector basis the most concise and relevant combination of fundamental indicators by which to locate potentially attractive opportunities.

In terms of basic materials stocks, for which risk is practically written-in to the equation, the most telling fundamentals boil down to price-to-book value, invested capital, depreciation, institutional holdings, and trailing net income (a complete overview of these criteria can be found here). A precursory glance at the companies who receive a 5-star rating after being filtered through the Small-Cap Stars screener testifies to the soundness of the methodology:

Carrizo Oil & Gas Inc. (CRZO)

Market Cap: $1.80 billion
Price: $44.20
Year-to-Date Return: 118.4 percent

The Houston, Texas-based independent oil and gas driller has enjoyed an excellent year so far, and there should be no mystery as to why. Carrizo’s presence in US shale plays could be described as ubiquitous, with ongoing operations at Texas’s Eagle Ford and Barnett shales, Colorado’s Niobrara, and the Utica and Marcellus formations of the Northeast. As of the beginning of the year, the company has been sitting on a total of 50 million barrels of oil equivalent and 430 cubic feet of natural gas that should have no trouble finding its way to the surface through 300 different producing wells.

Energy Partners Ltd. (EPL)

Market Cap: $1.56 billion
Price: $40.40
Year-to-Date Return: 78.20 percent

Energy Partners, also headquartered in Houston, is an independent exploration/production outfit that works offshore, primarily in US waters in the Gulf of Mexico, particularly off of the Louisiana coast. The company began 2013 with interests in 37 different producing fields representing estimated proven reserves of some 77 million barrels of oil equivalent.

OM Group (OMG)

Market Cap: $1.08 billion
Price: $34.06
Year-to-Date Return: 54.50 percent

The Cleveland, Ohio-based OM Group is a specialty chemicals/materials manufacturer whose business is divided into three segments: the chemicals and magnet technology segments serve a primarily industrial clientele, while its battery division caters to the aerospace, defense, and biotech industries.

Quaker Chemical (KWR)

Market Cap: $1.04 billion
Price: $81.05
Year-to-Date Return: 51.10 percent

The Conshohocken, Pennsylvania-based manufacturer produces chemicals industries that include, among others, lubricants, sealants, coatings, finishing compounds, and hydraulic fluids. Its customers include a gamut of industrial companies, as well as the aerospace, construction and automotive spaces. Additionally, Quaker offers chemical management services.

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Horsehead Holding Corp. (ZINC)

Market Cap: $595.87 million
Price: $13.51
Year-to-Date Return: 32.32 percent

The Pittsburgh, Pennsylvania-based Horsehead is a producer and purveyor of zinc and nickel-based products and services. Operating primarily in the US and Canadian markets, the company’s zinc segment produces coatings for various industrial and manufacturing uses, as well as zinc oxides and high-purity zinc powders and alloys employed in a spectrum of industries that range from automotive to pharmaceuticals. The nickel segment offers recycling services to steel industry, processes waste material containing metals, and also recuperates used nickel-cadmium batteries.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of 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:

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