Small, cheap stocks are always attractive, regardless of the kind of investor you are.
And these seven — SciClone Pharmaceuticals (SCLN), Cowen Group (COWN), Inuvo (INUV), Kingstone Companies (KINS), Dot Hill (HILL), Teekay Tankers (TNK) and Nobilis Health (HLTH) — are worth your attention wherever you are on the investing scale.
If you have a well-established portfolio, they can be stocks that add some zip for some of your more risk-tolerant capital.
But even if you’re just building a portfolio, it’s always good to look for cheap stocks with overlooked potential.
You see, most big firms can’t put an analyst on every stock, and most institutions don’t start paying attention to a stock until it has hit a $1 billion market cap. And even then they can be thinly followed.
Luckily, my equity evaluation system doesn’t discriminate between big and small; it just looks for stocks whose prices and earnings are moving in the right direction.
These seven fit the bill. All represent different industries but all have one thing in common: They’re in growth mode right now.
Cheap Stocks: SciClone Pharmaceuticals (SCLN)
SciClone Pharmaceuticals (SCLN) is a U.S.-based biotech that offers an array of drugs in its key market, China.
Its one proprietary drug, Zadaxin, is a hepatitis B and C (HBV and HCV) drug that also has other uses. According to the World Health Organization, 130 million to 150 million people in the world currently have HCV. And of them, 350,000 to 500,000 die each year from HCV related causes.
Independent healthcare analyst Datamonitor estimated that the HCV market was set to grow 230% percent per year and peak at $22.5 billion in 2025.
China is an interesting market for non-Chinese companies because of internal efforts to build up the Chinese pharmaceutical and biotech industries rather than handing over the market to Western firms.
SCLN walks a thin line into this marketplace. Especially in the HBV and HCV sectors. Right now, there are two big drugs on the market that cure HCV but they’re inordinately expensive.
As China looks for low-cost generics to provide is population, it’s also looking for effective treatments that won’t cost citizens or the government a huge amount of money. And Zadaxin may be that drug.
Even after getting hammered over Chinese economic concerns, SCLN stock is up 93% in the past year and 11% year-to-date. And SCLN stock looks poised to continue soaring.
Cheap Stocks: Cowen Group (COWN)
Founded as a bond brokerage in 1918, Cowen Group (COWN) has seen a lot in its existence. And it has gone through quite a transition along the way.
Cowen Group specializes in investment banking and in 1994, the company merged with Ramius, a global alternative investment business. Alternative investments are investments that don’t deal directly with stocks. They are derivatives, commodities and real-estate-focused.
The company works with hedge funds and mutual funds through Ramius, as well.
The 2008 debacle was not good for the company, but COWN knows how to weathered crashes, so it found its footing and has managed to grow even as other financial stocks stumbled.
The reason COWN stock is attractive now, is precisely because much of its business is not about stocks. As the global economy recovers, the alternative investment sector, especially commodities will be where real opportunities continue to excel. And COWN hasn’t survived in the jungle by being a timid house cat.
COWN stock is up more than 20% year-to-date, so it’s already finding the right opportunities.
Cheap Stocks: Inuvo (INUV)
Inuvo (INUV) is an online marketing services company. Basically, that means the company has numerous ways of connecting advertisers with customers and vice versa.
This is a whole new world. But the fact is, as print media fades away and television morphs into online viewing, advertisers need places to get customers and establish a brand. INUV’s platforms allow its clients to be present to customers via desktops, mobile or laptops.
The company already claims 3 million users in 26 countries. And revenues were up 33% in the first quarter.
INUV stock has been on a tear — it’s up 140% year to date and 248% in the past year. However it has lowest PEG (price-to-earnings growth) of any stock in its sector, at 1.35.
Many companies in this space come and go; the best ones are usually bought out at a premium by the big players like Google (GOOG) and Yahoo (YHOO). And that is certainly a possibility for this young star.
Cheap Stocks: Kingstone Companies (KINS)
Kingstone Companies (KINS) is in the property & casualty insurance industry. P&C insurers are a hot sector because they do best in rising interest rate environments.
You see, these are cash-heavy businesses. They receive premiums from their clients and they hold on to that cash to pay any claims. KINS is a New York regional insurer that specializes in small- to medium-sized businesses, like taxi cab and limo services, apartments and condos, etc.
Generally, companies prefer to put that cash to use while it’s just sitting there, so they put most of it (hopefully) in safe, liquid places like U.S. Treasuries. So, when rates rise, so do their investments.
And KINS has been in this business since 1880, so it has seen a few economic cycles and knows how to play where we are in this recovery.
Because it’s a successful niche player, don’t expect growth to come from expansion. The growth will be in its return on investments and quite possibly a big insurer coming in and buying it. KINS stock also throws off a nice 2.6% dividend.
Cheap Stocks: Dot Hill (HILL)
Dot Hill (HILL) has provided entry-level and mid-range storage solutions for more than 20 years. Companies like HP, Lenovo and NetApp use Dot Hill’s private-label storage systems and resell them as their own products. It also works closely with Harris, Quantum, Samsung, Raytheon and a host of other players across the tech spectrum.
And the demand for secure data storage is a huge growth industry.
In the media and entertainment sector alone, storage demands are expected to increase 25x as quality of transmissions increases and more data is embedded in the content.
Then there’s the growing sector of video surveillance. Beyond YouTube videos — which are all securely stored in the cloud — imagine all the video generated by corporations, governments and agencies. Remember, the better the resolution, the more data it requires. All this is also extremely sensitive, so reliable, secure storage is a non-negotiable necessity.
And none of that takes into account big data. Global IT think tank Nasscom predicts that big data storage will grow almost 350% in the next 5 years.
HILL is on the inside track to grabbing serious market share in all these sectors, and it trades for a very reasonable 14.5 times forward earnings.
Cheap Stocks: Teekay Tankers (TNK)
Teekay Tankers (TNK) is in the oil tanker business. That may not sound like a good place to be right now, given the price of oil, but TNK stock is a great opportunity.
When oil is cheap, countries with money will fill up their strategic reserves on the cheap, so they keep tankers busy. Also, supply is flowing, so it means more ship loads of oil are heading out.
But that oil supply issue also means a higher demand for tankers. And TNK is seeing tanker rates that are twice or triple what they usually are this time of year.
The second half of 2015 may see rates slide back down a bit as new tankers are expected to launch, but TNK will stay busy, regardless.
Year-to-date, TNK stock is up 45% and almost 80% in the past year. That’s pretty impressive in a sector that usually suffers mightily in the summer and where its chief business driver is off almost 50% in the past seven months.
Even with a few more tankers coming online in the second half of the year, you also need to remember Iran will be shipping oil, and Iraq production is growing as well. All those factors add up to a great opportunity for TNK stock.
Cheap Stocks: Nobilis Health (HLTH)
Nobilis Health (HLTH) is a healthcare company that provides ambulatory and acute care services, primarily in the Southwest. It also works with partners in Oregon, Michigan, Minnesota, Tennessee and New Jersey.
HLTH is also partly a direct-to-patient marketing firm that focuses on minimally invasive treatments for specific outpatient treatments.
Basically, Nobilis identifies specific medical issues that can be treated reasonably easily and provides the marketing and facilities to do the procedures. Its two newest programs are NueStep for plantar fasciitis and tendonitis; and CuraSpine for neck and back pain.
Easy and cheap access with low Medicare costs are the rule of the day and will be for some time to come under the Affordable Care Act (ACA). This puts HLTH in a very good strategic position.
Nobilis also becomes a very interesting acquisition target, especially as healthcare firms now know that ACA is the law of the land and will be growing to gain more patients and market share.
HLTH stock is up 118% in the past year from moribund levels. Now is the time for new style healthcare firms like HLTH to charge forward.
Louis Navellier is the editor of Blue Chip Growth.
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