Top Small Caps for March
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On a given day, the bad news about political unrest or an oil crisis may win the battle, but the good economic news will win the war. Few people think crude oil is going to slide back significantly anytime soon. There’s something going in the Middle East right now, I think… maybe you heard about it. If you need more “good” economic news that’s out there, focus on this week’s retail sales, which were the strongest in four months.
The market ultimately rewards the stocks with the best earnings and sales results, and we have a feeling that if you buy the small cap stocks on this list, you’ll be feeling quite lucky indeed a few months from now.
Small Cap to Buy #1 – Radcom Ltd. (RDCM)
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Louis Navellier, Editor, Emerging Growth
Radcom Ltd. (NASDAQ: RDCM) is an Israel-based company, one of our hottest regions in terms of economic growth. It makes test equipment and software used in the creation, installation and maintenance of corporate computer networks. The company’s equipment identifies, diagnoses, isolates and resolves network problems. Radcom sells to telecom carriers, Internet service providers and communications equipment developers.
The stock contracted a bit in the past few weeks as investors took profits, but in my opinion, this just means that this stock offers an even better buying opportunity. Radcom continues to expand its business and take on more customers and release new products. This is going to help the company grow its profits in the year ahead. The communications equipment company just recently announced that its products will support the next generation wireless standard, LTE, and this will open it up to new customers in the year ahead.
Buy RDCM below $12.
Small Cap to Buy #2 – Opnext (OPXT)
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Nancy Zambell, Editor, Buried Treasures Under $10
Opnext, Inc. (NASDAQ: OPXT) is the global leader in high-speed optics for communications networks. The company designs and manufactures optical components, modules, subsystems, and components that transmit and receive data delivered via light in telecommunications, data communication, industrial and commercial applications. Its products enable high-speed network connectivity designed to meet the needs of increasing data usage.
Shares of OPXT were hit hard this week, along with all the other optical networking stocks when Finisar Corp. reduced its guidance for next quarter, below consensus estimates. The company blamed the weakness on “annual price negotiations that typically take effect on Jan. 1, the 10-day Chinese New Year shutdown, an inventory adjustment at some customers (particularly for products which had been on allocation and long lead times), and a slowdown in business in China overall.” But investors need to look at the overall picture, not just one company. After all, last month JDS Uniphase issued a very strong revenue forecast. And analysts have been raising their forecasts for OPXT.
Meanwhile, OPXT continues bringing forth new innovations, the latest being its next-generation 40G differential phase-shift keying (DPSK) MSA module. The company also announced the production release of its 40GBASE-LR4 CFP transceiver, the TRC5B20, a pluggable module capable of transmitting and receiving 40Gigabit Ethernet and OTU-3 traffic over reaches of up to 10km on single mode fiber.
In my opinion, this just makes OPXT a better buy. Buy OPXT up to $3.50.
Small Cap to Buy #3 – Zale Corp. (ZLC)
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Hilary Kramer, Editor, Breakout Stocks Under $5
As the economy picks up, so is consumer spending, and consumers’ appetite for the shinier things in life. Zale Corporation (NYSE: ZLC) sells diamonds and other jewelry products at 1,900 stores throughout the United States, Canada and Puerto Rico, as well as online.
After pulling itself back from the brink of bankruptcy, the company’s story keeps getting better. While it recently reported earnings that were short of expectations, it wasn’t due to weakness in sales. The company has continued its marketing and merchandising recovery with revenue from the Valentine’s Day season up 12%. I’m also optimistic it will find a buyer for its Piercing Pagoda brand given the improved M&A environment, which should pop the stock nicely.
Buy ZLC under $5.
Small Cap to Buy #4 – Titan International (TWI)
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Louis Navellier, Editor, Emerging Growth
Titan International Inc. (NYSE: TWI) makes tires and wheels for off-highway vehicles, i.e., farming equipment, military vehicles and construction trucks. If you look at the different industries of Titan’s customers, which include industry giants like John Deere, New Holland and Caterpillar, there is strength across the board. Agriculture is booming right now with subsidies from the government remaining at high levels and commodity prices on the rise. Military spending is at all-time highs, and investments in infrastructure by the government are also rising, which will help to buoy the construction industry over the short term.
For the fourth quarter, the company reported sales of $232 million, up 59% year-over-year and beating expectations. Its agricultural component grew by 20% and its earthmoving and construction segment increased by 32%. Earnings were 16 cents per share, beating analysts’ estimates of 5 cents per share by a whopping 220%!
Buy TWI below $27.
Small Cap to Buy #5 – Approach Resources (AREX)
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Louis Navellier, Editor, Emerging Growth
The United States is awash in oil and natural gas, but the trick is getting to it and extracting it in a cost-effective and environmentally safe manner. Thanks to companies like Approach Resources Inc. (NASDAQ: AREX), we are finally being able to explore untapped oil and gas reserves that are locked in sands and shale formations. Extracting hydrocarbons from these types of rock requires significantly more sophisticated drilling and fracturing technologies than are used in traditional oil well operations. And AREX is on the cutting edge of this industry.
This week, the company announced strong earnings results for the fourth quarter. Earnings were $261,000, or 1 cent per share, up from a net loss of $2.3 million, or 11 cents per share, in the Q4 2009. On an adjusted basis, earnings were 13 cents per share, beating analysts’ estimate of 10 cents by 30%! These results are quite strong , and I expect this stock to be a good bulwark as we go through a rather volatile period for the market as events in the Middle East and the rising oil prices continue to spook investors.
Buy AREX below $37.
