Below is a list of 10 small cap stocks with recent earnings surprises to consider in the short (or long) term. For the purpose of this monthly list, I define value as a stock with a projected current year PE of under 20 and a Price to Earnings growth ratio under 1. Small cap is defined as having a market capitalization under $1 billion. The earnings surprises are defined as stocks which have beaten estimates the past 2 quarters and have an average earnings surprise of 20% or more for the past 4 quarters. I also require stocks to be trading above their 200 day simple moving average. I use stockscreen123 as the tool and screener.
Last month's portfolio can be seen here. Last month the list outperformed at 3.48% (excluding any dividends) versus -.07% for SPY and -.21% for VBR, a small cap value ETF. Last months returned were bolstered by Amtech Systems (ASYS) at 18.64%, SciClone Pharmaceuticals (SCLN) at 18.11% and Richardson Electronics (RELL) at 15.55%. One stock on the list was a drag on the entire portfolio, China Valves Technology (CVVT) at -32.28%. Using a stop loss with positions could potentially prevent a substantial loss of this size.
Why do I track this screen? I find PEG an effective ratio for identifying growth stocks at a reasonable value. In addition, a recent history of earnings increases could, in theory, help identify companies with the ability to continue to surprise. Backtesting this screen with a rebalance period of every 4 weeks and a maximum position size of 10% (in instances where less than 10 companies qualify) has produced solid 5, 3, and 1 year returns (see last month for a backtest). A quick visual inspection shows this screen has done well as a high beta play - outperforming in positive market environments and struggling in down markets. Also, a 4 week rebalance period can lead to high turnover and transaction costs which can be neutralized by free trades.
This month's list consists of the following 10 stocks:
No positions
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Market News and Data brought to you by Benzinga APIsLast month's portfolio can be seen here. Last month the list outperformed at 3.48% (excluding any dividends) versus -.07% for SPY and -.21% for VBR, a small cap value ETF. Last months returned were bolstered by Amtech Systems (ASYS) at 18.64%, SciClone Pharmaceuticals (SCLN) at 18.11% and Richardson Electronics (RELL) at 15.55%. One stock on the list was a drag on the entire portfolio, China Valves Technology (CVVT) at -32.28%. Using a stop loss with positions could potentially prevent a substantial loss of this size.
I exclude OTC stocks and I further narrow the list based on additional stockscreen123 fundamental factors to 10 stocks or less. The list, as always, is not a specific portfolio but a recommendation for further research. Since this is a purely mechanical screen, I play no discretion in the results (other than establishing the original screen criteria). Of note, MDF has been a qualifying stock on this list since May. I continue to watch it for potential price breakouts but have yet to see a significant breakout. After struggling to break strongly above the $4.50 level, it broke above this level last month only to find significant resistants at $4.80 (chart courtesy of Finviz):
Why do I track this screen? I find PEG an effective ratio for identifying growth stocks at a reasonable value. In addition, a recent history of earnings increases could, in theory, help identify companies with the ability to continue to surprise. Backtesting this screen with a rebalance period of every 4 weeks and a maximum position size of 10% (in instances where less than 10 companies qualify) has produced solid 5, 3, and 1 year returns (see last month for a backtest). A quick visual inspection shows this screen has done well as a high beta play - outperforming in positive market environments and struggling in down markets. Also, a 4 week rebalance period can lead to high turnover and transaction costs which can be neutralized by free trades.
This month's list consists of the following 10 stocks:
| Ticker | Name | Trend | SS123 Rank | MktCap | Industry |
| MDF | Metropolitan Health Networks, | Here | 99.17 | 193.75 | Healthcare Facilities |
| NSIT | Insight Enterprises, Inc. | Here | 99.14 | 694.11 | Computer Hardware |
| SCLN | SciClone Pharmaceuticals, Inc | Here | 98.29 | 208.9 | Biotechnology & Drugs |
| GLDD | Great Lakes Dredge & Dock Cor | Here | 98.14 | 499.13 | Construction Services |
| DDIC | DDi Corp. | Here | 98.07 | 239.62 | Electronic Instr. & Controls |
| ASYS | Amtech Systems, Inc. | Here | 97.76 | 251.54 | Semiconductors |
| MOH | Molina Healthcare, Inc. | Here | 97.19 | 917.45 | Insurance (Accident & Health) |
| HITK | Hi-Tech Pharmacal Co. | Here | 93.31 | 310.97 | Biotechnology & Drugs |
| IRBT | iRobot Corporation | Here | 91.77 | 665.17 | Appliance & Tool |
| RUSHA | Rush Enterprises, Inc. | Here | 91.68 | 720.19 | Auto & Truck Manufacturers |
No positions
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