10 Micro-cap Value Stocks

I am a member of AAII (American Association of Individual Investors) and one of their more popular screens is the Shadow Stock Screen.  I conduct a close replication of this screen on a monthly basis.  This is a very simple screen that seeks out small/microcap value stocks.  The screen criteria I use within stockscreen123 are:

• No over-the-counter stocks
• No financial stocks
• Market cap > $20 Million and < $200 million
• Previous EBITDA quarter and trailing twelve months are positive
• Share price > $1
• Price/book < .80
• Price/sales < 1.2
• Top 10 stocks are selected based on highest 52 week returns
• Minimum average daily volume > 5k shares

This is the tenth month of performing the screen. Decembers results averaged 12.29% for the 10 stocks, led by Silverleaf Resorts' (SVLF) return of over 38% in 4 weeks and Fuwei Films (FFHL) 34% 4 week return (returns are hypothetical and exclude commissions and taxes, low cost trades are always one option to avoid commissions).  The most recent month this strategy returned an average of -5.44% in four weeks.  As I have repeatedly stated this strategy tends to be high beta - it performs very well in bullish markets and may underperform in bear markets.  Clearly, it has been very profitable in recent months as equity markets continue to rise and last month struggled as markets struggled.
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One option is to abandon this type of strategy or move to cash when an underlying index such as the Russell 2000 is trading below a long term moving average such as the 200 day moving average.  Currently the Russell 2000 is above its 200 day moving average.  Another consideration is to hedge the strategy by shorting a small cap ETF or purchasing an inverse small cap ETF. 

Ticker	Name	Trend	MktCap	Pr2SalesTTM	Pr2BookQ	EBITDATTM	EBITDAQ	Pr52W%Chg
FFHL	Fuwei Films (Holdings) Co., L	Here	50.85	0.81	0.63	9.23	4.12	238.26
ABL	American Biltrite Inc.	Here	30.94	0.15	0.62	7.51	1.01	164.42
GFN	General Finance Corporation	Here	70.66	0.41	0.64	25.67	9.2	142.24
ESCA	Escalade, Inc.	Here	68.99	0.58	0.8	12.66	3.47	113.33
SVLF	Silverleaf Resorts, Inc.	Here	92.67	0.41	0.45	51.6	9.87	100.83
SURW	SureWest Communications	Here	173.75	0.71	0.63	77.02	20.77	29.38
COBR	Cobra Electronics Corporation	Here	23.15	0.21	0.66	5.74	2.84	28.73
SCX	The L.S. Starrett Company	Here	74.47	0.33	0.61	16.75	5.21	25.8
WCAA	WCA Waste Corporation	Here	132.44	0.58	0.64	53.13	12.74	24.95
BLD	Baldwin Technology Co.	Here	24.55	0.16	0.45	2.39	0.27	20.77

No positions

Backtesting this strategy the past 5 years including .5% for slippage, with no commissions or taxes accounted for, results in:




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