By Steve Reitmeister, Editor in Chief of TipRanks
This week we turn our attention to small caps as they saw outsized declines during the Q4 correction. Thus, many are ripe for outperformance as the bull market gets back on track like the three I share below.
They are riding the leading edge of the digital marketing frontier. What is called a cloud based knowledge engine platform so that brands can put out messages on every conceivable digital media outlet. I know this may not be the most intuitive explanation. So perhaps go to their website to increase your understanding of their unique offering.
From an investment point of view we are talking about a tech growth stock that is a leader in its field. This has the Best Investors in our universe giving it a VERY Positive reading. Financial Bloggers are on the same page. Ditto for Hedge Fund Managers. But my favorite part is that the Insiders are buying in. This is often the hardest part for a young tech firm as the early employees are almost always selling to become wealthy for the first time in their lives. But when these insiders are adding shares…then it is worth our attention.
Not surprisingly analysts are quite positive on shares with an average target price of $23.20. Good to note that Naved Khan from SunTrust Robinson, who is actually in the top 2% of all analysts this past year, has a street high $28 target on the stock. That would represent a 61% gain from current levels. My hope is that these shares follow the script from another recent small cap tech play in the portfolio like CLDR. That being a volatile stock that outperforms as the overall market heads higher.
Overweighting the strong US consumer has been a major theme for me this year given the robust employment picture and ample increase in retail spending. Conn’s is right in the sweet spot for the consumer given their growing chain of electronics/furniture/appliance stores.
Even though the earnings outlook remains robust, the stock could not hold up under the pressure of the Q4 correction. From peak to valley it sold off 60% and is now just bouncing from bottom. That spells ample opportunity for us as shares continue to rehab back to full health.
Focusing on the TipRanks indicators we see that the Best Performing Investors are on board. Bloggers are too. More importantly we see positive indications from Insiders and Hedge Funds.
Moving on to the analysts, there is not as much coverage because this is our smallest stock at just $600 million market cap. But often that lack of coverage is what spells more upside as others catch wind of the robust earnings story at an incredibly low PE. How low? How about forward looking PE of 7.5 when earnings growth is expected at 20%.
Gladly those analysts who are covering are unanimous in their approval with Buy ratings. Even better, is an average target price of $32.75 which represents a 57% upside potential. I think you can see ample reason why we would want to put this growing retailer in our shopping cart.
This manufacturer of industrial transmissions, clutches and brakes actually fits into all 3 categories of stocks ready to outperform. It’s a small cap industrial stock that is definitely in the Risk On camp. Those credentials are a big part of why shares tumbled from a high of $53 to $23 during the correction.
That is a bummer for former shareholders…but a great opportunity for us. We get to swoop in and enjoy a tremendous value proposition as the average analyst has a target price of $45 which marks 47% upside from current levels. And with the earnings outlook undiminished it certainly has a shot to retake the previous high of $53 which is 73% higher.
Along with that we also have positive indications from Bloggers and Insiders. The most impressive TipRanks indicator is the Hedge Fund managers with nearly $100 million in recent share purchases.
I think you see there are lots of good reasons to get in gear and add AIMC to our portfolio. If you need one more it’s the 2.2% dividend yield that will only accelerate our final return.
(AIMC, CONN and YEXT are just 3 of the stocks I have selected for the Smart Investor portfolio. There you will see many others stocks loaded with positive TipRanks indicators that are primed to outperform in the year ahead. Discover the Smart Investor portfolio here).
Disclaimer: In general, I own the stocks that I highlight in commentary. When you think about it…why would you ever take advice from an investment professional who wasn’t willing to put his money where his mouth is?