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4 Growth & Value Small Cap 'Best Buys'

 February 15, 2012 10:01 AM
 


by Richard Moroney, editor Upside Stocks

Both growth and value stocks deserve a place in most portfolios. Rather than bet on one or the other, investors should focus on attractively valued growers.  

Below, four especially attractive picks are profiled: Buckeye Technologies (BKI), Curtiss-Wright (CW), Neustar (NSR) and WellCare Health Plans (WCG). These are each stocks that are supported by earnings momentum from both the growth and value segments.

Buckeye is classified as a value stock. Yet December-quarter earnings per share jumped 38% to $0.50 excluding charges, $0.03 above the consensus.

For fiscal 2012 ending June, per-share earnings are expected to increase 22%, on top of a 145% gain in fiscal 2011.

Results have benefited from favorable pricing and improved cost controls, partly aided by restructuring efforts. Last month, Buckeye closed a pulp-making plant in Brazil and sold a non-core paper business.

On Jan. 24, the company raised its quarterly dividend 17% to $0.07 per share, payable March 15. Buckeye, which yields 0.8%, is a Best Buy.

Curtiss-Wright designs and manufactures engineered products for the aerospace, power-generation, and oil and gas industries. Classified as a value stock, the company has solid earnings momentum.

Full-year 2011 and December-quarter results are due Feb. 14. For the year, per-share profits are expected to jump 20% to $2.76, while quarterly profits should climb 6%.

Curtiss-Wright has delivered four straight positive profit surprises, surpassing the consensus by an average of 11%. For 2012, the profit consensus is $2.99 per share, implying 8% growth. The stock is rated Best Buy.

Neustar offers services and products that help manage nearly all telephone area codes and numbers, enabling the routing of calls across various carriers. Considered a growth stock, Neustar offers robust earnings momentum at a reasonable price.

It ranks among the top 10% of U.S. stocks for Overall score and the top 15% for Earnings Estimates. Rising profit estimates call for per-share earnings of $2.26 for 2011, up 50%.

The consensus was $1.83 two months ago. For 2012, the consensus is $2.40, up 6%. Shares trade at 15 times estimated 2012 earnings, below the five-year average trailing P/E of 20. Scheduled to report results on Feb. 2, Neustar is a Best Buy.

Although Russell classifies WellCare Health Plans as a growth stock, it looks like a value play. The stock has a Quadrix Value score of 83, ranking it among the cheapest 17% of U.S.-traded stocks.

Shares have doubled over the past 12 months but still look cheap at 11 times trailing earnings, well below the stock's five-year average P/E of 16. The managed-care provider is benefiting from higher premium revenue and solid membership growth.

Over the next five years, per-share earnings are estimated to increase at a healthy 16% annualized rate. WellCare is a Best Buy.

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