Small Cap Value Stocks

Joel Anderson  |

Navigating the small cap market can be tricky. Smaller companies mean more volatility, and identifying opportunity is more difficult. However, when shopping for attractive investments, one can always rely on the Ben Graham method and keep an eye out for strong value buys. Heck, it worked for Warren Buffett, right?

Obviously, there’s no golden formula for picking stocks and even the most attractive value buys can go south in a hurry, but here are five small cap stocks that might warm Ben Graham heart. Each has a price to book ratio under 1, a price to earnings ratio under 15, a price to cash ratio under 3, and a price to free cash flow ratio under 15. While the long term prospects for these companies are no guarantee, they at least have an attractive price based on their assets and income.

Market cap: $472.9 million

P/B: 0.95

P/E: 11.60

P/C: 2.21

P/FCF: 5.75

Based out of Omaha, NE, Green Plains is an ethanol company that ships 1 billion gallons a year. Founded by Barry Ellsworth, the company’s kept an eye on expanding and acquired Choice Ethanol Holdings in June of this year. It’s been a strong year for Green Plains, one that’s seen its share price almost double.

Market cap: $794.97 million

P/B: 0.56

P/E: 13.64

P/C: 1.23

P/FCF: 4.10

SkyWest is a regional airline that contracts with major carriers and averages 1,893 departures a day as of August. Richard Branson famously said that the fastest way to become a millionaire was to “become a billionaire and buy an airline,” but SkyWest’s strong price to book ratio. The company’s had a turbulent couple of months, landing at a 18 percent decline from August 1 to August 28, only to take off in early September and gain back that lost value.

Market cap: $812.07 million

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P/B: 0.82

P/E: 13.10

P/C: 0.27

P/FCF: 0.46

Headquartered in Troy, MI and incorporated in 1993, Flagstar Bank has been operating as a saving and loan institution for 20 years. Operating in two segments, community banking and mortgage banking, the company has 113 branches in Michigan, having sold off its branches in Indiana and Georgia to focus more on its core business. Flagstar had a banner year in 2012, gaining some 284.16 percent, but its failed to build on those gains, giving back a little over 25 percent so far in 2013.

Market cap: $1.34 billion

P/B: 0.93

P/E: 8.27

P/C: 1.79

P/FCF: 1.74

American Equity Investment Life Holding operates in the life insurance and fixed annuity segments. Based in Des Moines, IA, the company’s been enjoying a particularly profitable 2013 for its shareholders. The company’s gained over 70 percent in share value and still manages to maintain an attractive price in relation to its book value and earnings.

Market cap: $1.41 billion

P/B: 0.85

P/E: 10.56

P/C: 1.35

P/FCF: 13.96

PHH is an outsource provider of mortgage and fleet management services that operates out of Mount Laurel Township, NJ. It’s not a volatile stock, showing relatively little movement over time, but it’s having a solid month. Shares are up almost 18 percent in September.

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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