- (0:30) - Russell 2000 Breakout
- (3:00) - Small Cap Value Stock Screener
- (4:55) - Top Stock Picks: Investing Ideas
- (12:05) - Episode Roundup: Podcast@zacks.com
Welcome to Episode #39 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
Historically, small cap value has outperformed small cap growth stocks. Over the last several years, however, that was the reverse, until the November 2016 election, when small cap value stocks soared.
But in 2017, small cap value is back to being relegated to the back of the pack. The Vanguard Small Cap Value ETF (VBR) has returned just 3.1% year-to-date. That is underperforming the small cap growth index (VBK) which is up 7.5%. It’s even underperforming the larger small cap index, the Russell 2000, which is up 4%.
That means there is a buying opportunity for investors willing to take a deeper dive into the small cap value names.
Screening for Small Caps Isn’t Easy
Tracey ran a screen looking for only the best of the small cap value stocks. But it turns out, there aren’t that many high-quality names out there that also have Zacks Ranks of #1 (Strong Buy) and #2 (Buy).
Investors should be careful with small caps. Many have market caps that are so low it makes investing in those stocks difficult.
Additionally, they tend to be more volatile so you should know your risk tolerance.
3 Small Cap Value Stocks to Keep on Your Radar
1. CAI International CAI is a transportation and logistics company with a market cap of $400 million. In its Q1 earnings, it said it saw a “strong and improving” market environment. It has a forward P/E of 13.2.
2. Energy Recovery ERII provides energy recovery solutions to the oil & gas, chemical and water industries. It’s due to report earnings on May 3. It has a market cap of $454 million and a forward P/E of 11.8.
3. Rocky Brands RCKY was founded in 1932 and is headquartered in Ohio. It makes premium Outdoor, Western, Duty, Work and Military footwear. In its Q1 earnings report, it said trends in stores have stabilized in 2017, especially in Work and Western. It has a market cap of just $100 million and a forward P/E of 14.8.
All three of these aren’t just value stocks. As an added bonus, they also have strong growth stories, with double and triple digit earnings growth expected this year.
What else should value investors know about small cap value stocks?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns shares of VBR in her personal portfolio.]
Want more value investing insights from Tracey?
Check out her weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks Tracey thinks are the best bargains now.
It holds between 20 and 25 value stocks for the long haul.
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CAI International, Inc. (CAI): Free Stock Analysis Report
VIPERS-SC VALUE (VBR): ETF Research Reports
VIPERS-SC GRWTH (VBK): ETF Research Reports
Energy Recovery, Inc. (ERII): Free Stock Analysis Report
Rocky Brands, Inc. (RCKY): Free Stock Analysis Report
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Zacks Investment Research