Welcome to Episode #54 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
2017 is the year of the large cap growth stocks. That has left value investors in the wilderness, especially small cap value investors.
Small cap value has, historically, outperformed growth, but not this year.
Small Cap Value Down in the Dumps
Year-to-date, the iShares Small Cap Value ETF (IWN) is down about 1%. But the small cap growth ETF (IWO) is up 9.3% during that same time. That’s a huge 10% swing.
But that means that small cap value stocks are actually on sale. Value investors have an opportunity to add to their positions at attractive valuations.
Tracey ran a screen to find small cap value stocks with P/Es under 15, P/S ratios under 1.0 and a Zacks Rank of #1 (Strong Buy) or #2 (Buy). Despite the narrow parameters, the screen gave her 15 quality stocks to choose from.
What are you waiting for? These small cap stocks have value and several even have dynamic growth.
5 Small Cap Value Stocks to Buy Now
1. Townsquare Media Inc (NYSE:TSQ) is a media, entertainment and digital marketing company that owns radio stations and websites. It trades with a forward P/E of 9.6.
2. Ultra Clean Holdings Inc (NASDAQ:UCTT) develops critical systems for the semiconductor and flat panel industries. Revenue was up 75.8% last quarter. It has a forward P/E of just 12.1.
3. Stoneridge, Inc. (NYSE:SRI) makes electronic components for the auto and truck industries including driver information systems, sensors, and tracking devices. It’s cheap, with a forward P/E of 11.5.
4. M/I Homes Inc (NYSE:MHO) is one of the small homebuilders. It saw record revenue, homes delivered and new contracts in the second quarter. The homebuilders are dirt cheap. MHO has a forward P/E of just 8.4.
5. ZAGG Inc (NASDAQ:ZAGG) makes screen protection, mobile keyboards and owns Mophie, which is one of the top selling battery cases for mobile phones. Sales are expected to rise 21% this year. It has a P/S ratio of just 0.6.
For investors, small cap stocks can be riskier than large cap stocks, due to their volatility, but the payoff can also be greater. These are just a few names that have solid fundamentals.
What else should you know about these small cap value stocks?
Find out on this week’s podcast.
Want more value investing insights from Tracey?
Value investors are a special breed of investor. They don’t follow the herd.
If that is your style of investing, be sure to check out Tracey’s weekly Value Investor service to receive more in-depth analysis on value companies and see which stocks she thinks are the best bargains now.
The Value Investor portfolio holds between 20 and 25 value stocks for the long haul.