by Will Ashworth | January 16, 2013 12:00 pm
When you take a look at the previous year’s best stocks from the whole Russell 3000 — which accounts for about 98% of U.S. equities — you’re bound to see some eye-popping returns. According to Bespoke Investment Group, the top performer was biotechnology micro-cap BioDelivery Sciences International (NASDAQ:BDSI), which gained 435% on the year. Heck, even the 50th-best performer managed a tantalizing 135%!
After a year like that, it would seem like sheer greed to bet on any one of these names coming close again. But I think five of the stocks that made this list in 2012 actually are very likely to repeat this year. Here they are:
2012 Return: +140.7%*
Russell 3000 Rank: 43
Early in January, the company formerly known as Smart Balance changed its name to Boulder Brands (NASDAQ:BDBD) to reflect the location of its new corporate headquarters, as well as the fact that it represented multiple after several acquisitions.
After roughly 140% gains in 2012, Boulder has a lot to look forward to in the coming year.
I became familiar with the company back in August 2011 when it paid $66 million for Glutino Food Group, a Montreal-based manufacturer of premium-priced gluten-free foods — an emphasis that intrigued me. Every day, more Americans find themselves unable to digest wheat and other proteins commonly found in bread.
Estimates put the gluten-free market as large as $2.6 billion annually. And in 2013, BDBD expects revenues to grow by at least 22% to $440 million, with operating income jumping 30% to $70 million. Boulder’s best days lie ahead.
* Bespoke lists as SMBL for 2012 purposes
2012 Return: +160.7%
Russell 3000 Rank: 33
If you run an acute-care hospital, there’s a good chance you’ve heard of this company.
AMN Healthcare (NYSE:AHS) provides staffing solutions and recruitment services for medical facilities across the country. Headquartered in San Diego with an office in Irving, Texas, the company began life in 1985 as American Mobile Nurses. After several acquisitions, however, it needed a more generic name that didn’t focus on one segment of its operations. Hence, AMN Healthcare was born.
CEO Susan Salka has been with the company for 22 years, the last seven at the helm. During her tenure, AMN Healthcare has become the largest healthcare staffing company in the U.S. According to the Association of American Medical Colleges, there will be a physician shortage of 130,000 by the year 2025; the American Association of Colleges of Nursing projects registered nurse shortage of 260,000 at the same point in time.
The long-term macro growth drivers play right into AHS’ strengths as a company. Simply put: It manages work force challenges more effectively than administrators can, and that keeps it moving forward on a profitable basis.
AMN Healthcare, which is headed to more than $1 billion in revenue in 2013, is my demographic pick for sure.
2012 Return: +260.8%
Russell 3000 Rank: 12
Another back-from-the-dead department store, Bon-Ton Stores‘ (NASDAQ:BONT), more than tripled in 2012. It now sits comfortably above $10 — something it hasn’t done since early 2007.
Bon-Ton is made up of eight nameplates, including its namesake with 64 stores. Its goal is to hit $3 billion in revenues with an EBITDA margin of 10%. At 2.2% for the 39 weeks ended Oct. 27, it’s a long way off from a profitability standpoint, but it’s making positive strides.
When Bon-Ton hired Brendan Hoffman as CEO last January, the retail veteran’s previous experience included a stint running Neiman Marcus Direct, the 39th-biggest retailer in the U.S. in terms of Internet revenue. One of the company’s goals, not coincidentally, is to generate 10% of its overall revenue online. That’s great to hear, because that’s where the profits are — not to mention successful e-commerce usually translates into a better customer experience.
Most importantly, its December same-store sales increased 2.4% — its best performance since December 2005.
Bon-Ton is going to surprise for a second year in a row.
2012 Return: +279.5%
Russell 3000 Rank: 10
Micro-cap stock Patrick Industries (NASDAQ:PATK, $170 million market cap) has provided building products and materials to America’s manufactured housing and RV industries since 1959. Going public all the way back in 1968, PATK has never grown beyond its small niche market — until now.
Patrick’s stock gained nearly 280% in 2012 thanks to record-setting revenues and earnings. The company reports Q4 and full-year 2012 results Feb. 19, and I expect them to be good, too. PATK’s $13 million in operating income in 2011 was the best in its 53-year history. In 2012, operating income through nine months is $22.4 million — 72% better than the whole of 2011.
This next year should decide whether Patrick Industries can move beyond its micro-cap status. With both the recreational vehicle and housing markets on the mend, I see no reason why it can’t repeat as a top performer in 2013 and reach $500 million in market capitalization by the end of 2014.
As a note, though, PATK trades fewer than 100,000 shares a day, so make sure to use limit orders and stop-losses when trading.
2012 Return: +312.7%
Russell 3000 Rank: 6
When a stock increases by more than 300% in one calendar year and yet it still trades for less than $8, you can be sure it wasn’t worth much when it started out.
WaterStone Financial (NASDAQ:WSBF) was operating under an FDIC consent order put in place in November 2009 that required WSBF to get its financial house in shape.
Once known as the Wauwatosa Savings Bank, it de-mutualized in 2005, reorganizing under a financial holding company structure. Three years after its demutualization, Wauwatosa Savings became WaterStone Bank SSB to better reflect the additional communities it served. But the good news didn’t last. Real estate loans for multifamily housing turned south, and the FDIC was forced to take action.
However, in December — after three years of hard work by bank employees — the FDIC terminated the consent order without comment. The community-focused bank is back making money for the first time since 2007. It’s doing so thanks to a 26% reduction in nonperforming loans over the past 24 months.
WaterStone Financial traded as high as $19 in September 2006. It looks like it’s on its way back there. Again, just exercise some caution — WSBF is even more illiquid than PATK at just 50,000 shares traded daily.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
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