The Best Small Cap Stocks to Buy Now
Over the next two months, third-quarter earnings will light a fire under the stock market. Even the worst companies should show some improvement over last year, since massive cost-cutting, layoffs and inventory reductions have been par for the course across Wall Street. These cutbacks will mean better year-over-year numbers for the majority of firms.
But what if you could zero in not on the companies that haven’t just reduced costs, but also managed to grow sales and earnings at a stunning rate over the last year or so? If you could do that, you’d have your hands on a sure-fire winner!
Well that’s exactly what I’m going to give you in these three small capstocks. Each stock is priced under $20 per share and has shown its tremendous strength by growing sales and earnings even during the economic downturn. That means as the economy forges ahead, these companies will race to the top of the market quickly — and deliver you big profits as a result.
Here are three small cap stocks to buy now.
Small Cap Stock #1 – IncrediMail (MAIL)
IncrediMail (MAIL) has found a way to capitalize on people’s desire to lace their emails with animated graphics and other special effects. The company develops software that lets users customize e-mail using animation, 3D effects, handwritten signatures and sound effects. The company’s flagship IncrediMail Xe is a free platform that introduces people to the product and generates revenue via the advertising and promotional links users are exposed to as they work. The company also offers IncrediMail Premium that allows for custom graphics, a voice message recorder and customer support to make the most of the tools.
It’s a simple strategy, but a very profitable one: In the second quarter, IncrediMail’s sales rose 29% to $1.5 million to $6.7 million compared with $5.2 million in the same quarter in 2008. During the same period, the company’s earnings rose 271.4% to $2.4 million or 26 cents per share compared with $0.6 million or 7 cents per share.
MAIL also just introduced IncrediMail 2 a few weeks ago — an upgraded tool with more bells and whistles — which could give the stock the momentum to attain record results later this year.
Small Cap Stock #2 – DynCorp International (DCP)
DynCorp International (
DCP) works behind the scenes to support the U.S. military and diplomatic efforts
on the front lines. Its contracts with the U.S. government to train police officers overseas are the company’s biggest source of business, along with interpreting and translating services. The Department of State and the U.S. Department of Defense are DynCorp’s largest customers — meaning DCP’s revenue stream isn’t impacted by weak consumer spending.
The numbers show how strong DCP is right now. The company posted higher profits on increased sales for its first quarter of fiscal 2010 that ended on ended July 3. DynCorp reported profits of $20.6 million for the quarter or 36 cents per diluted share, a 15% increase over last year that beat Wall Street estimates by a penny a share. Revenue was up almost 10% to $785 million on the quarter.
The outlook for this new buy is very bright, and now is a great time to purchase shares. The company revised up its full-year guidance based on recent contract awards, boosting revenue projections to $3.3 billion to $3.5 billion in fiscal 2010, up from a range of $3.25 billion to $3.45 billion. DCP also raised its earnings target for the year, meaning numbers should continue to improve even more over the coming weeks.
Small Cap Stock #3 – Sturm Ruger & Company (RGR)
Sturm Ruger & Company (RGR) is the biggest gun maker in the U.S. The company produces four categories
of firearms, namely pistols, revolvers, rifles and shotguns. Its models include hunting and target rifles, single and double-action revolvers, muzzle-loading guns, and double-barreled shotguns. Sturm Ruger also makes metal products (including golf club heads) for the commercial and military markets.
The recent popularity of Sturm Ruger and other gun companies is attributable to fear of changing gun laws under the Obama administration. The result has been booming sales and earnings: Just several weeks ago, Sturm Ruger reported profits of $8.7 million or 46 cents per share, compared with $1.1 million or 5 cents per share last year — a jaw-dropping 700% increase! What’s more, the gun maker’s sales nearly doubled in the second quarter thanks to the success of RGR’s new gun models.
These stellar results led the company to raise its quarterly dividend to 12.3 cents per share — a nice bonus on top of what I expect to be a boatload of profits from a surge in share prices. Expect another great showing in the third quarter!
