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 performed poorly, returning -11.60% (excluding any dividends) versus -3.67% for SPY and -3.93% for VBR, a small cap value ETF. As I've stated in the past this is a "risk-on, risk-off" trade. Even before the disaster in Japan, equity investors recently began taking profits. As investors take the risk off the table, screens such as this one may suffer.
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 December's list
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.
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 but is no longer on this month's list due to recent earnings surprise coming in at 2.41%, less than the required 20%. (chart courtesy of Finviz
This month's list consists of the following 10 stocks (no disclosures):
|ASYS||Amtech Systems, Inc.||Here||99.56||199.07||9.76||0.28|
|KELYA||Kelly Services, Inc.||Here||98.63||738.49||17.73||0.8|
|RCKY||Rocky Brands, Inc.||Here||98.4||97.12||10.57||0.96|
|SMRT||Stein Mart, Inc.||Here||98.08||433.42||11.84||0.71|
|SCLN||SciClone Pharmaceuticals, Inc||Here||97.38||197.91||9.02||0.46|
|GLDD||Great Lakes Dredge & Dock Cor||Here||97.24||445.11||12.49||0.33|