- (1:00) - Small and Micro Cap Value Stocks
- (4:30) - Stock Screen Criteria
- (6:20) - Tracey’s Top Picks
- (18:15) - Episode Roundup: SLYV, ACBI, CAI, LL, PCMI
Welcome to Episode #129 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.
Small cap value stocks have historically been one of the best areas to invest but in the last 5 years, they have underperformed.
The S&P 600 Value ETF has returned just 18% over the last 5 years compared to 49.5% in the S&P 500 and 73.9% in the NASDAQ.
But that could mean an opportunity to stock up in both small, and even smaller, i.e. “microcap” stocks.
The definition of microcap can be different for each investor. It can range from as low as $50 million to $200 or $300 million.
For the purposes of this podcast, a market cap of $500 million or less was used in order to get a larger choice of stocks.
How Do You Find Good Microcap Stocks?
It’s tricky to screen for microcaps while using the Zacks Rank because that implies that there is at least 1 analyst covering the company.
But not many analysts cover the microcap stocks.
Additionally, you then need other solid fundamentals like earnings growth.
We don’t want to buy just any microcap. We want the best.
Screening for Microcap Stocks
In this screen, we looked for stocks with a market cap under $500 million, a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and a PEG ratio of under 1.0.
The PEG should hopefully provide both growth and value while the Zacks Rank should provide rising earnings estimates.
This screen returned just 12 stocks.
5 Cheap Microcap Stocks
1. Atlantic Capital Bancshares ACBI is headquartered in Atlanta and has $2.9 billion in assets. It has a market cap of $477 million and estimates are on the move higher for both 2019 and 2020. This bank has a PEG of just 0.5.
2. CAI International CAI is a transportation company in containers, railcars and logistics worldwide. It has a market cap of $493 million and a forward P/E of just 6.
3. inTEST Corporation INTT is truly a microcap with a market cap of just $74 million. The company designs and manufactures engineered solutions for Automated Test Equipment. Its products are used in a variety of industries including the semiconductor, auto and aerospace. It has a cheap forward P/E of 7 and a PEG of just 0.7.
4. Lumber Liquidators LL is the largest specialty retailer of flooring in America with 413 stores. It has a market cap of $320 million. While its forward P/E is 24, which doesn’t indicate value, it has a PEG ratio of just 0.9 thanks to 2018 expected earnings growth of 141%.
5. PCM Inc. PCMI is a multi-vendor provider of tech solutions with a market cap of $382 million. The shares have soared in 2019, up 78%, but are still cheap with a forward P/E of 11.9 and a PEG of 0.6.
What else should you know about finding great, cheap microcap stocks?
Listen to today’s podcast to find out.
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CAI International, Inc. (CAI) : Free Stock Analysis Report
Atlantic Capital Bancshares, Inc. (ACBI) : Free Stock Analysis Report
Lumber Liquidators Holdings, Inc (LL) : Free Stock Analysis Report
inTest Corporation (INTT) : Free Stock Analysis Report
PCM, Inc. (PCMI) : Free Stock Analysis Report
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