Wells Fund Knocks On Opportunities

• Paul Katzeff
• On 5:51 pm EDT, Tuesday September 1, 2009

Jenny Jones builds Wells Fargo Advantage Small Cap Opportunities with several types of growth stocks.

She combines rapid growers with companies emerging from dramatic change.

If either has been underpriced by the market, so much the better. A dramatic change can stem from a turnaround story.

As the $609 million fund's (NASDAQ:NVSOX - News) prospectus puts it, "These changes may involve a sharp increase in earnings, the hiring of new management or other measures taken to narrow the gap between share price and takeover/asset value."

Jones is with Schroder Investment Management, hired as subadviser to the Wells Fargo fund.

Its approach has led to a 20.12% gain for the fund this year, going into Tuesday. Its small-cap growth rivals tracked by Morningstar averaged a 21.34% gain. The S&P 500 was up 14.97%.

Over the past three years the fund's average annual gain was 0.53% vs. -5.72% for its peers and -5.79% for the S&P 500. The fund is closed to new investors.

Bruker , a top holding as of April 30, is 42% off its 52-week high. Still, it's up 151% this year.

After bottoming at 3.07 in late November, the stock has been working on the right side of a base. It's now trading around 10.

The company designs and makes systems and products for studying molecules.

Earnings per share fell 46% in Q2 after rising 67% in Q1.

The company said second-quarter earnings and revenue were down because of a tough economy and unfavorable currency exchange rates.

The company has responded in part by slashing costs and paying down debt.

In announcing Q2 results, the company noted that nearly 70% of its revenue is from nonprofits such as universities and medical schools, as well as from the government.

Less Sensitive

Those customers tend to be less sensitive to economic conditions, noted Chief Financial Officer Bill Knight.

Analysts see 2010 earnings rebounding 29%.

Health Management Associates has soared 286% this year.

The company, which runs hospitals in largely rural Southeast and Southwest locales, broke out of its base on July 30.

Earnings per share are rallying. They were -12% in Q3 and were flat in Q4 and Q1. They rose 30% in Q2.

EPS is seen rising 21% this year after last year's 30% decline.

Analysts polled by Thomson Reuters have revised their estimates upward seven times in a row since April 14.

It is in IBD's Medical-Hospital industry group. Currently ranked No. 65, that group was at No. 73 last week and No. 129 six months ago.

The stock has an IBD Composite Rating of 96.

Euronet Worldwide , another top holding, is yet another four-bagger for the fund -- up 103% this year.

Trading near 24, the stock has risen 13% since breaking out of a flat base in late July.

The financial transactions processor gets about 75% of its revenue from non-U.S. operations. In the first half of 2009, the dollar fell in value vs. key foreign currencies.

Still, EPS fell 6% in Q2 after rising 7% in Q1.

The Kansas-based company was helped by profit improvement in its electronic funds transfer segment and in its prepaid processing segment. Business was also up in its money transfer segment.

Help On The Way?

Also, the company is poised to benefit from an economic rally. Its unrestricted cash edged up in Q2 to $160.5 million from $158.7 million in the first quarter.

The company cut debt by nearly $17 million to $337.2 million. Debt to equity was 9% at the end of 2008. That was down from 39% and 38% the prior two years.

The stock has an IBD Composite Rating of 93.

Buzz up!