Small Cap Stocks

Newly profitable small-cap biotechnology company DUSA Pharmaceuticals (DUSA) is an investment with fantastic return opportunities. With rapidly increasing sales and its greater than 80% gross margin leading to even more rapidly growing profits, investors may want to join in the chant: D-U-S-A! D-U-S-A! DUSA is an integrated dermatological biotechnology company whose main products treat the common skin condition actinic keratoses (AK), precancerous lesions caused by sun exposure. AKs are responsible for more than 8 million visit to dermatologists and other skin care physicians annually. This figure is significantly higher than 2003’s 5.2 million visits. It is estimated that the direct costs of AK are greater than $1 billion annually.

Levulan PDT is used to treat non-hyperkeratoic AK of the face or scalp. AKs are precancerous lesions caused by sun exposure. Levulan PDT is applied with DUSA’s Kerastick. Exposure to DUSA’s BLU-U light source converts the application into the drug actually

Following is a list of 31 companies with a market cap between $200-1000 mn, consensus EPS growth rates for 2011 and 2012 greater than 50%, and a PEG ratio of less than 0.5.

Tkr

Company Name

EPS Current Yr Growth (%)

EPS Next Yr Growth (%)

EPS Current Yr PE/Growth

EPS Next Yr PE/Growth

Market Cap (mil)

FLWS

1800FLOWERS.COM

400

146.67

0.16

0.18

204.76

FTEK

FUEL TECH INC

225

74.95

0.17

0.3

213.07

CPWM

COST PLUS

89.66

69.09

0.21

0.16

224.62

SEH

SPARTECH

129.17

92.73

0.15

0.11

226.27

GRB

GERBER SCIENTIF

220

243.75

0.28

0.07

247.37

PULS

PULSE ELECTRONIC

207.41

62.65

0.11

0.22

252.67

SAIA

SAIA INC

540.63

74.47

0.04

0.17

263.69

BIOS

BIOSCRIP INC

114.29

200

0.27

0.05

268.7

LF

LEAPFROG

135.71

95.45

0.17

0.12

279.82

CDI

CDI CP

1400

68.89

0.02

0.29

290.42

RENT

RENTRAK CORP

1053.33

92.05

0.04

0.26

298.46

INSP

INFOSPACE INC

412.5

84.15

0.1

0.28

MIND C.T.I. (MNDO) is a small micro-cap gem. The company provides software solutions to various types of communications providers. It has a rock solid balance sheet, a low PE and delivers a high-yield dividend. The company’s activities are described as follows:

Mind C.T.I. Ltd. develops, manufactures, and markets real-time and off-line billing and customer care software for various types of communication providers. The company offers billing and customer care solution supports multiple services, including voice, data, and content services, as well as prepaid and postpaid payment models in a single platform. It also provides a workflow engine to support the creation and execution of business processes, such as order management, trouble ticket, and debt collection. In addition, the company offers an integral point of sale solution that comprises dealer, store, and cashier management and sales processes. Further, it provides professional services, primarily to billing and customer care customers, consisting of

If you're looking for small cap ideas, the following list might interest you.

Here we present 4 stocks priced under $3 that have seen significant improvements in analyst rating over the last three months.

Mean analyst ratings of 1 indicates a “buy” recommendation, whereas a rating of 5 indicates a “sell” recommendation - therefore, the rating becomes more bullish as it approaches 1.

Do you agree with the analyst consensus? Use this list as a starting-off point for your own analysis.

click for expanded image

List sorted by change in rating.

1. Capstone Turbine Corp. (CPST): Industrial Electrical Equipment Industry. Market cap of $474.74M. Current price at $1.93. Over the last three months, the average analyst rating improved from 1.25 to 1. The stock is a short squeeze candidate, with a short float at 12.88% (equivalent to 5.97 days of average volume). The stock has had a good month, gaining

Chinese RTO Puda Coal, Inc (PUDA) Chairman Ming Zhao transferred the ownership of PUDA’s sole Chinese operating entity, Shanxi Puda Coal Group Co., Ltd (“Shanxi Coal”), to himself in 2009 without shareholder approval according to official government filings. Then, in 2010, Zhao sold 49% and pledged the other 51% of Shanxi Coal to CITIC Trust Co., Ltd (“CITIC”), a Chinese private equity fund, for RMB245 million ($37.1 million).

Zhao then recklessly leveraged Shanxi Coal by borrowing RMB3.5 billion ($530.3 million) from CITIC at an incredibly high 14.5% annual interest rate (including fees) to finance the development of its coal mines. PUDA shareholders are completely unaware of these transactions that decimate the value of its U.S. listed shares.

Background – An Industry Facing Government Mandated Consolidation

According to PUDA’s 2010 10-K filing:

In order to improve production efficiency, workplace safety and to reduce coal mine accidents, the Shanxi provincial government issued

For the Seeking Alpha readers that consider themselves value investors, I suggest you take a look at a microcap company named Perceptron Incorporated, ticker symbol (PRCP).

Perceptron was recently named as one of the 150 "Best and Brightest" innovative leaders for 2011 and a "Company to Watch" by MDB Capital Group, LLC. This recognition is given to those technology leaders ranking in the 90th percentile or above among 1,500 companies with U.S. patents as rated by PatentVest®, MDB's proprietary, intellectual property (IP), business intelligence database. According to MDB, companies on last year's "Best and Brightest" list outperformed the S&P Small Cap 600 Index by 1.4 to 1 and the S&P 500 Index by 2.8 to 1.

To get a better feel for exactly what Perceptron does, the link to it's corporate website is below. Pay close attention to the 'What's New' section at the right of the website. There you

The rationale for investing in Israeli tech stocks is simple: It is the most innovative high-tech nation in the world. Last week, I noted the reasons why Israel stands above all other nations when it comes to the high-tech industry. Now, as promised, I want to give you the name of one of my favorite emerging stocks in the high-tech world of "The New Silicon Valley."

As I mentioned several times over the past month, every portfolio should include dividend-paying stocks as part of a diversification strategy. So when I came across a microcap Israeli tech stock with a high-yield dividend of 9.7 percent, I was compelled to dig further into the company.

Most investors associate dividend paying stocks with blue-chip value companies with moderate growth and high-cash flow. But small cap stocks with large dividends also have the ability to deliver high-yield income. The benefit of buying small cap

I love small stocks, the smaller the better; small-caps, micro-caps and especially mini-micros, a term I’m using for stocks priced at single-digit levels. This doesn’t mean I’ll buy based solely on a single-digit stock price. Due diligence is always necessary and I’ll discuss that below. But I prefer to hunt and analyze in the lower echelons of the market’s size hierarchy, away from the big well-known issues whose prices are heavily influenced by name recognition, popularity, etc. The lower you go, the more likely it is that you will be able to succeed with garden-variety fundamental analysis, the things you read about in web tutorials, how-to books, seminars, etc.

Here are the two key investment drivers that benefit min-micros.

1. Very Small Market Capitalizations: There are times when S&P 500 stocks or a broader group of big-caps will lead the market, but over longer time periods, small-caps tend to outperform. This

It was announced during the after hours trading session on 04/06/11 that GlaxoSmithKline (GSK) and XenoPort, Inc. (XNPT) received FDA approval for their restless legs syndrome [RLS] product, Horizant (.pdf), after having initially been issued a complete response letter [CRL] for the compound in February of last year.

The company's stock opened the following morning at $11.11 and spiked as high as $11.42 before closing the day at $9.96, up 56% from its previous close of $6.38.

Institutional ownership of Xenoport's stock is remarkably high, accounting for over 90% of the float, while the reported short interest as of 03/15/11 was just 2,624,002 shares. This seems to be a clear indication that there was little doubt Horizant would be approved this time around.

With just 35.26M shares outstanding and over 26M shares changing hands on 03/07/11, it seems likely that some long-term holders partook in a well

Planet Earth is in the midst of a food bull market. Wellington West Capital Markets Managing Director Robert Winslow follows small-cap agricultural stocks that can give investors both diversification and leverage to achieve double-digit percentage growth. In this exclusive interview with The Energy Report, Robert shares some small-cap names where investors can plant capital and reap vigorous rewards.

The Energy Report: We know that a growing population is a long-term driver of fertilizer, but what has driven the potash market so dramatically higher over the last six months?

Robert Winslow: Well, it's interesting and it's pretty simple. The key driver for all these Ag equities is rising grain prices—whether it's potash, phosphate, agricultural equipment manufacturers or any companies in the Ag space. These equities generally benefit when grain prices are rising.

It's a function of farm income—the grain complex drives farm income, which drives farm expenditures. We called the bottom

On 4/6/2011, Advanced Battery Technologies (ABAT) issued a press release responding to our research report titled "Advanced Battery Technologies (ABAT): The Most Egregious Chinese RTO."

We present, side-by-side, excerpts from ABAT's response and statements from their official filings. ABAT's response contains numerous false and misleading statements which directly contradict its filings. We have provided links to these filings to make it convenient for the reader to verify our claims.

In our report, we noted that Chairman Fu now owns the company's key subsidiary, which ABAT had previously claimed ownership of.

We wrote:

If the filings are accurate, the Chairman transferred ownership of the company's sole operating subsidiary to himself without explanation or compensation. If the filings are inaccurate, then the company is guilty of misrepresenting itself as previously owning 100% of HLJ ZQPT.

Excerpt from ABAT response on 4/6/2011:

[HLJ ZQPT] has been owned by 16 investors, including Chairman Fu,

To call Acme Packet's (APKT) 25 fold rise the last two years parabolic would be an understatement. It's been more like a vertical lift-off starting at $3/share in early 2009 and hitting $77 on 3/4/11. The stock ricocheted off the top of its all time high last month, and you could have scooped it up for $67 on April 1st, but it has since bounced back to the $75 range. The digerati like this company and it comes as advertised. Its signature technology is the science of our time.

Back in the late 1990s George Gilder used to evangelize about the telecosm (infinite bandwidth) and how increased use of broadband would engulf us and dictate consumer and business behavior. Well that time has come. Acme Packet is serving notice that it is an elite class of technology company and is building a global franchise. The company seemed to be locked

Microcap Value investing is not getting very much attention these days. Most investors are choosing large cap managers, large cap stocks, or ETF's that track small and mid cap companies rather than uncovering value in the middle markets. The general avoidance of small cap value stocks has created an environment that has left many stocks below book value stocks trading at incredibly cheap valuations. (While completely lacking in net-net stocks, where net current assets are higher than the company's market cap, meaning that if you liquidate the assets shareholders would make money.)

Investors with a penchant for cheap stocks should consider the following ten microcap bargains, even though they are not traditional "Cigar Butt" type investments (companies trading below net current assets minus total liabilities) which in the past have driven strong investment gains for patient and alert value investors. When investing in cheap small caps, it pays to be

Most publicly traded utilities have the distinct advantage of paying investors a dividend. This dividend significantly enhances the equities' total return over time.

As I've stressed before, every portfolio should include dividend-paying stocks as part of a diversification strategy. So when I came across a diversified energy company that was paying a 4.4 percent yield to investors, I had to write about it.

This regulated power business is an oil and gas producer, but it also dabbles in coal and some energy marketing too.

The company is Black Hills Corporation (NYSE: BKH) and it just finished the first quarter with a comfortable 13 percent increase in share price, as you can see in this chart.

Black Hills, which now has a market cap of $1.3 billion, grew out of the partnership that first brought electric lights to the legendary gold rush town of Deadwood, South Dakota, in 1879. The company

The magnitude 8.9 earthquake and the subsequent tsunami that hit near Sendai, Japan will continue to have ripple effects for months to come on small to large cap companies in an assortment of sectors.

While Japan has dealt with earthquakes throughout its history, the March 11, 2011 earthquake was the largest to hit the country in 120 years, causing hundreds of billions of dollars’ worth of damage and a nuclear crisis, of which the extent is still unknown.

The wrath of the triple assaults from the earthquake, tsunami and nuclear disaster to the third largest global economy (behind the U.S. and China) can be expected to have a noticeable effect on some companies in industries within many sectors including basic materials, capital goods, consumer goods, energy, industrial goods, technology and utilities.

To put Japan’s importance to the U.S. in perspective, Japan is the United States’ fourth largest trading partner.

In

By David Sterman

From employment trends to factory production levels to trade figures, all signs are pointing to an improving U.S. economy. And in the early stages of any economic rebound, investors always flock to stocks with small market capitalizations. Back in 1990, when the economy was about to break out of its shell, the Russell 2000 Index, which focuses on small cap stocks, rose 100% during the next 36 months.

These days, these small caps are back in vogue again. The Russell 2000 has risen for seven of the last eight months. The index is now within just a few points of all-time highs hit back in 2007.

[Click all to enlarge]

Below is a list of seven rallying small-cap stocks, with market caps between $100-$300M. All of these U.S. companies are currently trading above their 20-day, 50-day and 200-day moving averages. Interestingly, these stocks have also seen significant insider buying over the last six months, with increases in insider ownership above 3%.

If you're interested in small-cap momentum ideas, the list might offer an interesting starting point. Full details below.
Click for expanded images


1. Saga Communications Inc. (SGA): Broadcasting Industry. Market cap of $147.90M. The stock is currently 6.32% above its 20-day MA, 16.68% above its 50-day MA, and 45.42% above its 200-day MA. Net shares purchased by insiders over the last six months at 26,076 shares, which represents a 91.4% increase in insider ownership. This is a risky stock that is significantly more volatile than the overall market (beta = 2.41).

2. Alliance Healthcare Services, Inc. (AIQ): Medical Laboratories

The small-cap Russell raced higher last month to end what was the best first quarter in years. During that time, several stocks have hit 52-week highs, particularly over the past few weeks. Here are the top three small cap stocks that benefitted from the rise.

[Click to enlarge]

Epicor Software Corp. (EPIC)

Epicor hit another 52-week high on April 4. Shares of the application software designer/developer are $1.30, or 13.7% higher on the session. Volume is significantly higher at 9.1 million shares traded as of 1:00 p.m. EST. Average volume has been 273,800 share over the past 30 days.

The company stated that it would be acquired by private equity firm Apax Partners for $12.50 a share in an all-cash deal. The transaction values the company at $976 million. The acquisition is expected close by the end of the second calendar quarter of this year.

Westport Innovations (WPRT)

Like Epicor,

Following is a list of 19 companies with market caps between $50-200 mn, consensus EPS growth rates for 2011 and 2012 greater than 50%, and a PEG ratio of less than 0.5.

Tkr

Company Name

EPS Current Yr Growth (%)

EPS Next Yr Growth (%)

Current Yr PE/Growth

Next Yr PE/Growth

Market Cap (mil)

AMRB

AMERICAN RIVER

200

128

0.22

0.15

65.17

WMCO

WILLIAMS CONTROL

291

59

0.04

0.14

80.66

SALM

SALEM COMM.

375

61

0.03

0.1

90.96

RLOG

RAND LOGISTICS

217

105

0.18

0.18

98.47

JRJC

CHINA FINANCE ON

78

138

0.37

0.09

100.33

CPIX

CUMBERLAND PHARM

87

82

0.28

0.17

112.99

CLUB

TOWN SPORTS INT

350

144

0.11

0.11

115.09

DUSA

DUSA PHARMA INC

82

100

0.32

0.13

126.04

SRSL

SRS LABS INC

98

51

0.23

0.29

126.92

RDNT

RADNET INC

311

76

0.05

0.11

130.44

CVTI

COVENANT TRANSPO

88

94

0.24

0.12

135.12

MIND

MITCHAM INDUS

620

The early-stage RXi Pharmaceuticals (RXII) pulled off what could become a surprising coup last week when it announced a merger with privately-held Apthera, Inc. for just 4.8 millions shares of RXII's common stock.

At the time of the announcement, the deal was worth just over seven million dollars, not including possible payments on future commercial and regulatory milestones.

With this deal, RXi acquires the Phase III-ready NeuVax, an immunotherapeutic treatment for breast cancer that is scheduled to be tested in a Phase III trial in 2012. Given the market potential of successful cancer vaccines, RXi could have come up with a steal of a deal.

That said, cancer vaccines - although possibly the wave of the future for cancer treatment - are still highly speculative investments, given that the road to regulatory approval for these treatments are dotted with a long line of failures.

Given the success of Dendreon (DNDN),