Stephen DeNichilo Shares His Small Cap Picks

Stephen DeNichilo, portfolio manager of The Federated Kaufmann Small Cap fund, revealed on CNBC's Power Lunch three small cap stocks that he would buy. US Concrete Inc USCR is the largest manufacturer of ready-mix concrete in the United States. DeNichilo thinks that the concrete industry is going through a consolidation, which gives US Concrete Inc a pricing power. The company is earning more than it earned in the last construction peak, with volumes below the historically normal volumes. Metaldyne Performance Group Inc MPG has the highest margins and the lowest valuation among the auto part suppliers. Its bookings are up 40 percent year over year and its future growth is going to depend on auto makers trying to achieve higher efficiency standards, said DeNichilo. Tyler Technologies, Inc. TYL has very low capital needs and a very high recurring revenue, explained DeNichilo. He added that it should have 20 to 25 percent earnings growth next year. The company is perfectly positioned to benefit from the increase in the state and local government spending.