U.S. equities are rallying higher on Monday thanks to strong economic data out of China, raising hopes that the drag from the U.S.-China trade standoff is abating. Both the official and the Caixin manufacturing PMI moved back into expansion territory for March. This overshadowed some disappointment in the latest U.S. retail sales numbers.
The primary motivating factor for the stock market remains a fear of missing out, or FOMO, as the Federal Reserve’s dovish turn in January continues to underpin equity prices. Also helping is the conclusion of the Trump-Russia Special Council investigation, raising the specter of new spending on infrastructure — something President Trump is already discussing.
As a result, the major averages are bouncing nicely off of critical support levels and threatening to break up and out of their post-October trading ranges. While extended large-cap issues like Microsoft (NASDAQ:MSFT) get all the attention, a number of cheap small-cap stocks are showing signs of life.
Here are five small-cap stocks to buy:
Caesars Entertainment (CZR)
Shares of casino and resort operator Caesars Entertainment (NASDAQ:CZR) are once again making a run at its 200-day moving average, a level that has constrained the stock since last summer. Management has been battling with activist investor Carl Icahn, but have recently come to an agreement on director appointments and nominations in exchange for limiting his position to 28% of the float. Coverage was recently resumed with an Outperform rating at Credit Suisse.
The company will next report results on May 23. Analysts are looking for a loss of 16 cents per share on revenues of $2.1 billion. When the company last reported on Feb. 21, earnings of 25 cents per share beat estimates by 36 cents on an 11.3% rise in revenues.
Shares of home selling and listing service Redfin (NASDAQ:RDFN), which aims to put downward pressure on real estate brokerage fees (the subject of a possible class action lawsuit, it should be noted), are perking up lately. As we head into the peak summer buying season, and with long-term interest rates moving lower, there’s hope that the housing market can catch another leg higher despite affordability issues.
The company will next report results on May 9 after the close. Analysts are looking for a loss of 75 cents per share on revenues of nearly $104 million. When the company last reported on Feb. 14, a loss of 14 cents per share missed estimates by 19 cents on a 29.5% rise in revenues.
American Eagle Outfitters (AEO)
Shares of American Eagle Outfitters (NYSE:AEO) are peaking their head above its 200-day moving average for the first time since early November, further retracing a near 50% decline from the highs set last summer. Investors are excited about a plan to expand into Europe, with the first stores expected to open in Ireland this summer.
The company will next report results on June 5 after the close. Analysts are looking for earnings of 21 cents per share on revenues of $869.8 million. When the company last reported on March 6, earnings of 43 cents per share beat estimates by a penny on a 1.2% rise in revenues.
KB Home (KBH)
Shares of KB Home (NYSE:KBH) are pushing up and away from their 200-day moving average, fully reversing the decline from the late September highs and setting the stage for a push back toward levels seen in early 2018 near the $40-a-share threshold. Management recently noted that order declines are slowing, suggesting that the housing market — despite affordability headwinds — is beginning to firm up.
The company will next report results on June 25 after the close. Analysts are looking for earnings of 40 cents per share on revenues of $997 million. When the company last reported on March 26, earnings of 31 cents per share beat estimates by 6 cents on a 6.9% drop in revenues.
Century Aluminum (CENX)
Shares of Century Aluminum (NASDAQ:CENX) are looking ready to exit a seven-month consolidation range with a push back above its 50-day moving average — potentially ending a long selloff that started over a year ago. With China’s manufacturing activity perking up again, investors are looking for the demand for raw materials like industrial metals to perk up. Shares were recently upgraded to hold by analysts at Berenberg.
The company will next report results on May 23 after the close. Analysts are looking for a loss of 78 cents per share on revenues of $508.65 million. When the company last reported on Feb. 21, a loss of 43 cents per share beat estimates by 10 cents on a 1% decline in revenue.
As of this writing, William Roth did not hold a position in any of the aforementioned securities.
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