It’s a Small Cap World (for Now) – Russell 2000 Index Up nearly 18 Percent for Year

Graphic courtesy of Russell Investments

 

The stock market finally “took a breather” on Monday of this week, as the Wall Street Journal characterized it. The resilient bull market of 2013 has seen only four sessions in May that had a decline in the Standard & Poor’s 500-stock index and Monday was one of them. This year’s bull market rally has recently been across the board–Asian markets have been up, European markets turned up, and market watchers are anxiously waiting for tomorrow, Wednesday, May 22, when Federal Reserve Chairman Ben Bernanke is scheduled to testify to Congress and the Fed releases the minutes from its last public policy-setting meeting. Will Bernanke offer up any clues about his next steps?

Most importantly for Smallcap World, the Russell 2000 index, which tracks the performance of smallcap U.S. equities, climbed above the 1,000 level for the first time Monday, a metric that MarketWatch considers “psychologically important” for smallcap stocks. As of Monday morning, May 20, the Russell 2000 was up 17.9 percent for the year-to-date, according to FactSet (The Associated Press reported the Russell 2000 up 17.5 percent for the year).

The conventional wisdom is that small caps stock are doing well because they are more U.S. focused than the large caps, which tend to be multi-national. And the U.S. economy is recovering as opposed to other economies around the world. But many large caps are doing well, too,

You don’t have to look far to find small cap stocks at 52-week highs, even “all time highs.” Of course the question always is, how much higher can these stocks go? Buy now or wait for the correction that so many experts have been predicting is right around the corner for months now?

We’ve selected a few stocks we know are at all-time or 52-week highs, and others we’ve covered lately that seem to be on the upswing.

Calabasas, CA-based National Technical Systems * (Nasdaq: NTSC, http://www.nts.com/) is a relatively unknown smallcap stock but also the world’s largest independent engineering services and testing company. It’s biggest markets include aerospace and defense, but also works in the automotive and telecommunications markets, among others. NTSC closed at an all-time high of $13.09, up 94 cents on May 21, with a market cap now of about $150 million. NTSC is lightly traded, only about 7,500 shares a day, although that is trending up. 

Northville, MI-based Gentherm * Incorporated (Nasdaq: THRM, http://www.gentherm.com/) is a global developer and marketer of thermal management technologies for a broad range of heating and cooling and temperature control technologies. Best known for its Climate Control Seat systems that actively heat and cool seats in more than 50 vehicles made by the world’s leading automobile manufacturers, Gentherm (formerly called Amerigon) has branched out into heated and cooled bedding systems, cupholders, storage bins and office chairs. THRM also reached a 52-week high of more than $18 this week, then closed May 20 at $17.78, down 33 cents for the day. Its market cap is now $594 million. As recently as last July THRM was trading at just above $10.

We recently featured Cincinnati-based LSI Industries (Nasdaq: LYTS, http://www.lsi-industries.com/) , a company that offers a different take on an LED lighting company. LYTS creates LED video screens and LED specialty lighting for sports stadiums and arenas, digital billboards and entertainment companies. It closed April 29 at $7.09 with a market cap of $170 million. LYTS closed May 21 at $8, up 1 cent for the day, with a market cap now of $192 million.

Analysts at CRT Capital recently upgraded Atlanta-based Beazer Homes USA (NYSE: BZH, http://www.beazer.com/), a company that builds and sells single-family and multiple-family homes in 16 states in the U.S., to a “Buy” with a $29 price target. BZH also acquires, improves and rents homes. The company operates through commissioned home sales counselors and independent brokers. As recently as last Sept. 14 BZH was trading for $3.77. It closed March 20 at $16.86 with a market cap of $410 million. BZH closed May 21 at $21.75, down 98 cents for the day. Its market cap is now $538 million.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/), like many solar stocks, have been on the upswing lately. SPWR closed May 8 at $15.36, down 6 cents for the day, with a market cap of $1.8 billion. It closed May 21 at $21, down $1.70 for the day but got up to $23.76 just last week. Its 52-week trading range is now $3.71-$23.76.

Fremont, CA-based Procera Networks (Nasdaq: PKT, http://www.proceranetworks.com/) works with mobile and broadband network operators providing intelligent policy enforcement solutions for managing private networks. PKT’s products are sold under the PacketLogic brand name to more than 600 customers in North America, Europe and Asia. PKT’s 52-week trading range is $10.12-$25.99. At mid-day May 2 it was trading at $11.22, with a market cap of $229 million. At market close May 21 PKT was trading at $13.89, down 3 cents for the day, with a market cap of $282 million.

* Denotes client of Allen & Caron Inc., publisher of this blog.

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Small Caps Hoping for Lift from Booming U.S. Auto Sales

The month of May was a bummer for most investors, judging on the big hit all the major indexes took. But not for the nation’s Big Three automakers: Ford, General Motors and Chrysler, according to Marketwatch (http://www.marketwatch.com/story/big-three-auto-sales-roar-in-may-2012-06-01?siteid=bnbh). With the help of

Photo courtesy of Port Clinton Ford

 

looser credit demands for buyers, all three posted double-digit sales growth, according to the story, which was picked up by most major news outlets.

For General Motors, May 2012 was the best month of sales since August 2009 and 11 percent better than a year ago. GMC vehicles and Buick were up 19 percent and Chevy was up 10 percent, noted the Marketwatch piece. For Chrysler, which is adding production capacity “as quickly as possible,” it was the best month in five years. U.S. sales for Chrysler rose 30 percent in May and Dodge posted its 26-th consecutive month of year-over-year sales growth, the Marketwatch story noted.

Ford’s U.S. sales rose 13 percent led by the F-Series and E-Series trucks and the Fusion.

We’ve been covering a random mix of small cap auto dealerships and automotive-related companies that are suppliers, parts makers and partners of the major OEMs. Here’s a look at how they are faring: 

Duluth, GA-based Asbury Automotive Group (NYSE: ABG, http://www.asburyauto.com/) operates 79 auto dealerships in 18 metropolitan markets in 10 states. More than half of the dealerships are Toyota or Honda dealerships. Two months ago when we first looked at ABG it was trading at nearly $27. It closed June 4 at $24.30, down 49 cents on the day. Market cap is $766 million, 52-week trading range is $14.96-$29.62..

Bentonville, AR-based America’s Car Mart (Nasdaq: CRMT, http://www.car-mart.com/) sells older model used vehicles and vehicle financing at 113 dealerships in nine states. About two months ago CRMT was trading at just less than $44. It closed June 4 at $40.95, down $1.05 on the day. CRMT’s market cap is $384 million and 52-week trading range is $25.81-$48.24.

Houston-based Group 1 Automotive (NYSE: GPI, http://www.group1auto.com/) sells new and used cars, light trucks and auto parts, vehicle financing and insurance.  It owns and operates 131 franchises offering 31 automobile brands with 104 dealership locations, 25 collision centers in the U.S. and an additional five dealerships and three collision centers in the UK. As recently as April 3 it was trading for $59.15. GPI closed June 4 at $48.26, up 19 cents for the day. GPI’s market cap is $1.04 billion and 52-week trading range is $33.31-$59.97.

Charlotte, MI-based Spartan Motors (Nasdaq: SPAR, http://www.spartanmotors.com/) makes motor vehicle chassis and bodies for OEMs. Its stock was trading at about $5.50 last fall but has dropped pretty steadily since. SPAR had a good day June 4 when the stock closed at $4.43, up 23 cents for the day. The Wall Street Cheat Sheet recently picked SPAR as a company “to watch” based on the GM results and the general automotive industry. Market cap is $150 million and 52-week trading average is $3.65-$6.67.

Milton, GA-based Exide Technologies (Nasdaq: XIDE, http://www.exide.com/) manufactures lead-acid batteries for transportation and industrial energy applications. A year ago XIDE was trading in the $7.50 range, but has been punished by investors for disappointing Wall Street. The stock closed June 4 at $2.35, up 6 cents on the day. Its market cap is $184 million and 52-week trading range is $2.22-$8.

Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/) makes a heated and cooled seat system now featured in 54 vehicle models manufactured by Ford, GM, Hyundai, Toyota, Nissan, Land Rover and Jaguar, as well as a cupholder for Chrysler.  Amerigon, which recently announced the acquisition of its main competitor, W.E.T. Automotive Systems of Germany, dropped as low as $6 in 2010 and then ran up as to highs of more than $18 last summer. But the market downturn has hit ARGN and its now trading just off its 52-week low. It closed June 4 at $12.05, up 21 cents on the day. Market cap is $356 million and 52-week trading range is $11.41-$18.18.

Racine, WI-based Modine Manufacturing Company (NYSE: MOD, http://www.modine.com/) manufactures a variety of thermal management products including radiators, engine and transmission oil coolers for the auto industry. This is the stock that Seeking Alpha in November 2010 listed as one of “10 Stocks on the Upswing.” It’s been on a downswing for the past year, considering last July it was trading for about $16 and closed June 4 at $5.73, down 21 cents for the day. Market cap is now $267 million, 52-week trading range is $5.67-$16.02.

* Denotes client of Allen & Caron, publisher of this blog

Bull Market Rally in 2012 Would Be Major Boost for Small Cap Stocks–WSJ

If we get a bull market run in 2012, and many of the more optimistic analysts are suggesting we will, then the small cap stocks will lead the rally, according to a variety of market prognisticators and a bit of history noted in the Wall Street Journal (http://online.wsj.com/article/SB10001424052970204336104577096741015408230.html?KEYWORDS=ben+levisohn). Of course, if the market tanks, the small caps will no doubt be hit hardest because they tend to be more susceptible to volatility and “are particularly sensitive to bad news” and the “macro influence” coming from places like Europe or China, the WSJ article suggests.

But many signs point to a rebound. Jim Paulsen of Wells Capital Management “foresees 15 percent rise for US stocks in 2012, according to a MarketWatch headline Dec. 30. And smallcaps have already been rallying, starting about Oct. 4. Small caps are up 11.5 percent since then, outpacing the large caps by 3.5 points, according to the WSJ. Relatively good news from Europe and improved economic data in that time frame has prompted the small cap rally. If the U.S. economy continues expanding, as such advisors as Goldman Sachs and Macroeconomic Advisors have predicted, the small caps should continue to grow as well.

History is on the side of small caps as well. During a bull market, small caps have outperformed the S&P 500 Stock Index by 47.1 percent since 1929, the WSJ reports, citing Ned Davis Research, which just last month upgraded small caps to overweight.

So how do you choose which small caps to invest in? Look for the highest quality companies, such as the ones that are listed on the S&P Small Cap 600 which requires four consecutive quarters of profitability, as opposed to an index like the Russell 2000 which only screens for size, the WSJ notes.

Here are three other small caps, including one (VHC) picked by Otis T. Bradley of ICM Capital Markets in New York:

Scotts Valley, CA-based VirnetX Holding Corp. (Amex: VHC, http://www.virnetx.com/) is a developer of software and technology for securing real time security solutions over the Internet. In November 2009 it was trading at $1.95 but then went on a tear, running all the way up to $41.77 in early July before market corrections brought it back down to the $20 range where it has stayed since late August. VHC closed Dec. 29 at $25.23, up 13 cents on the day, but Bradley lists this stock as capable of gaining “at least 5- 10-fold over the next 1-2 years.” 

Mountain View, CA-based IRIDEX * (Nasdaq: IRIX, http://www.iridex.com/) is a developer and marketer of innovative laser systems and related products for the treatment of eye diseases and another small company on the rise.  A 3-year turnaround and a new CEO, Dominik Beck promises a more commercial orientation.  IRIDEX was trading at $3.66 on Nov. 16 and closed at $3.58 on Dec. 29.  The 52-week range is $3.08-$4.75. Market cap is $32 million.

Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/) is the world’s leading marketer of thermoelectric technologies for automobiles and is best known for its actively heated and cooled seat systems featured in more than 50 vehicles. But it is winning new headlines for a thermoelectric generator (TEG) that the company is developing with partners including BMW, Ford and Caltech’s Jet Propulsion Lab. The TEG converts waste exhaust heat into electricity, a technology that has been shown to reduce toxic emissions and increase fuel economy along with providing a much needed new source for electricity in a vehicle. The January edition of Car and Driver lists the TEG as one of the top 10 most promising innovations of 2012 and experts are predicting a rebound in auto sales in 2012. The stock closed Oct. 10 at $14.02, down from its $18.18 high for the past year, but above the $9.33 low. On Dec. 29 it closed at $14.22, up 25 cents for the day.

* Denotes client of Allen & Caron, Inc., publisher of this blog

Hot Market Driving Interest in Automotive Technologies, Both Old and New

They say the used car market is hot right now, thanks mostly to the slumping economy. But even a hot market can’t really explain the recent news from CNNMoney that the world’s oldest, still running used car just sold for $4.6 million (http://money.cnn.com/2011/10/10/autos/worlds_oldest_car/index.htm?iid=HP_Highlight). No, this 1884 De Dion-Bouton et Trepardoux, also called “La Marquise,” is a collector’s item and its selling price, according to the report is the “highest price ever paid for an early automobile at auction” and twice what its owners expected. The car certainly offers an interesting look at how automotive technology has changed over the years.

This is, in effect, where car technology started: Its fuel was not gasoline, but powered by steam created by “coal, wood and bits of paper.” Top speed is 38 miles per hour but it takes about a half hour to warm up and create enough power to drive it.

Of course, for our purposes, this is an interesting ignition point for covering some of the new automotive technologies that are powering some small cap stocks. Here are just a few and perhaps we can add to this list in the near future:

Cincinnati-based AMP Electric Vehicles * (OTCBB: AMPD, http://www.ampelectricvehicles.com/) is a young company that currently retrofits those sport utility vehicles (SUVs) and crossovers that Americans love to emission-free pure electric vehicles. AMPD is currently working on the Mercedes Benz SUV ML 350; they drop out the internal combustion engine completely and integrate their proprietary electric drive components into the Mercedes, leaving all the safety and luxury components intact. Drivers tell us that the superb M-B performance is not only undiminished; in some ways it is actually enhanced. CEO Jim Taylor is a former President of GM’s Cadillac division and CEO of its former Hummer division.  We anticipate announcements about the Jeep Cherokee as well.  The stock trades thinly, as often happens in such early stage companies, and is currently selling for $0.50. Its 52-week high is $1.05.

New Castle, PA-based Axion Power International * (OTCBB: AXPW.OB, http://www.axionpower.com/) manufactures high-performance low-cost lead-carbon (PbC(R)) batteries for a variety of markets, including for “mild” and “micro” hybrid vehicles, which are anticipated to be the commonest form of hybrid in the US within a couple of years (and it already is the most common in Europe). Its PbC batteries are as easy to manufacture as the older lead-acid batteries, but they use activated carbon instead of half the lead.  They are lighter and 100% recyclable (unlike lithium ion batteries), and have a higher charge acceptance and faster recharging rates, making them ideal for the growing  micro-hybrid and mild hybrid markets.  AXPW stock closed Oct. 10 $0.51, near the low end of its 52-week range ($0.42-$1.27).

San Carlos, CA-based Tesla Motors (Nasdaq: TSLA, http://www.teslamotors.com/) manufactures the Tesla Roadster and other electric vehicles and electric powertrain  components. With a market cap of $2.9 billion it’s really out of our smallcap focus, but it certainly should be included in even a brief survey of new automotive technologies. Its stock was highest (more than $35) about a year ago but like many companies now is languishing. It closed Oct. 10 at $27.80.

Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/) is the world’s leading marketer of thermoelectric technologies for automobiles and is best known for its actively heated and cooled seat systems featured in more than 50 vehicles. But it is winning new headlines for a thermoelectric generator (TEG) that the company is developing with partners including BMW, Ford and Caltech’s Jet Propulsion Lab. The TEG converts waste exhaust heat into electricity, a technology that has been shown to reduce toxic emissions and increase fuel economy along with providing a much needed new source for electricity in a vehicle. The TEG is currently being tested in a BMW X6 and Lincoln MKT. The stock closed Oct. 10 at $14.02, down from its $18.18 high for the past year, but above the $9.33 low.

Oak Park, MI-based Azure Dynamics (Toronto: AZD.TO, http://www.azuredynamics.com/) develops and manufactures electric power trains for light and heavy-duty commercial vehicles, including vans and buses. The company is best known for partnering with Ford and building the electric drivetrains for the all-electric Ford Transit Connect. Azure recently announced that it is enrolling Ford truck dealerships across North America to be electric Transit Connect dealers and service centers, the sale of 100 electric Transit Connect vans in Europe, and the sale of 34 electric Transit Connect to municipalities and a regional governmental authority in North America. Its stock closed Oct. 10 at $0.15 with a 52-week range of $0.11-$0.41.

* Denotes client of Allen & Caron, Inc., publisher of this blog

Treasure Trove of Rare Earth Minerals Found on Floor of Pacific

The news that Japanese geologists have found as much as 100 billion tons of rare earth minerals in the deep sea mud on the seafloor near Hawaii and Tahiti two to four miles below the surface of the Pacific Ocean made headlines around the world. The journal Nature Geoscience was the first to report the discovery (http://www.nature.com/ngeo/journal/vaop/ncurrent/full/ngeo1185.html) but many other publications picked up on the story including the Wall Street Journal, CNBC.com and Yale Environment 360, just to name a few.

The discovery of large deposits of rare earth minerals is great news for the hybrid automobile and mobile phone industries since these minerals are crucial in creating the electronics, batteries and magnets that make up these products. Currently, proven reserves of these products are indeed rare with China by far the biggest miner and exporter of these elements, followed by Russia and the U.S. China’s reluctance to part with enough of the elements to satisfy global demand has caused volatility and unpredictability in prices for the minerals and was the basis of a condemnation this week from the World Trade Organization.

While the news of this new resources is very promising, the viability of extracting them from the sea floor remains in question. The articles suggest that acid leaching is a proven method for recovering the minerals from the deap sea mud, but actually accessing the minerals from the sea floor will be very expensive and commercialization could be as much as 20 years away, according to several of the reports.

Nonetheless, the news was welcomed by industries throughout the world, including various small cap companies that are focused on the use or commercialization of minerals in one form or another.

Vancouver-based Rare Element Resources Ltd. (AMEX: REE, http://www.rareelementresources.com/) explores and develops mineral properties in the U.S. and Canada and owns the Bear Lodge property in northeast Wyoming. REE, which has a market cap of $449 million, was as high as $17.92 earlier this year, was trading at $10.25 on July 6.

Toronto-based Avalon Rare Metals Inc. (AMEX: AVL, http://www.avalonventures.com/), formerly known as Avalon Ventures, develops rare metal deposits throughout Canada.  AVL traded for nearly $10 in April but had backed off to $6.45 by July 6. The one-year chart shows a nice upswing with the stock price less than $2 a year ago.

Beijing-based China Shen Zou Mining and Resources (AMEX: SHZ, http://www.chinaszmg.com/) mines and processes nonferrous metals in China. It’s a relatively small company ($104 million market cap) that was trading for less than $1 about a year ago and then ran up to more than $10 in January. On July 6 it was trading for about $3.37.

Two larger companies in the rare metals business include Australia-based Lynas Corporation (LYSCF.PK, http://www.lynascorp.com/), with a market cap of $3.34 billion, mines and processes rare earth metals in Australia and Indonesia; and Greenwood Village, CO-based Molycorp (NYSE: MCP, http://www.molycorp.com/), with a market cap of $4.82 billion, operates the Mountain Pass Mine in San Bernardino County, CA. MCP has been enjoying a fine run in the past 12 months. A year ago it traded for about $12, then ran to nearly $80 in May before correcting down to $57.47 by July 6. A CNBC report suggested Molycorp could be an acquirer and consolidator in this market.

One small cap company that needs a rare earth element, tellurium, in its devices is Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/), which makes heated and cooled seat systems for the global automotive market, among other products. Amerigon management closely watches the volatile price of tellurium, which can be meaningful in its profit margins. The company, which is in the process of acquiring W.E.T. Systems of Germany, a rival, has enjoyed the revival of the automobile industry. Its stock was trading at $17.80 July 6, a 52-week high.

Not exactly a peer, but another small cap mineral resources company that makes its living digging up sands from ancient sea bottoms is Industrial Minerals Corp. * (OTCQX: ILMCY, ASX: IDM, http://www.industrialmineralscorp.com.au/). Industrial Minerals has recently begun excavating chromite, garnet, zircon and hi-iron from the mineral sands near Coos Bay, OR. The chromite, which is used by foundry operators worldwide for making iron and steel, is considered exceptionally high grade and demand is robust.

* Denotes client of Allen & Caron, publisher of this blog

May Auto Sales Fall, but Makers Remain Bullish for Year

News from automakers was not particularly good in May: After what the New York Times suggests has been a “steady recovery” in the industry, auto sales slumped in May. The Times offered a variety of reasons for the slowdown including parts shortages related to Japan, a pullback of sales incentives and higher prices (http://www.nytimes.com/2011/06/02/business/02auto.html?_r=1&scp=3&sq=Bill%20vlasic&st=Search). The Times‘ story added several interesting tidbits:

  • For the first time since 2006 American automakers ranked 1-3 in sales in May (GM, Ford and Chrysler, respectively with the Chevrolet Malibu the top selling car overall) over their Japanese counterparts;
  • In what might be considered good news for forward looking investors, automakers still are predicting a surge later this year, sometime in the fall.
  • While the traditional giants Toyota and Honda were hardest hit by the shortages, the Korean leader Kia/Hyundai “bucked the trend” and actually did very well in May, as did Volkswagen. In fact, Kia sales rose 53 percent to a monthly record of 48,212, according to the Times report.
  • Ford announced its third price increase of the year in May, particularly for the models offering the best fuel economy.
  • The preference for smaller, fuel efficient vehiches has caused Ford and GM to adjust production and build more small cars and fewer SUVs and pick-ups.
  • Eight of the top 10 vehicles sold in May were built by American carmakers.
  • The Ford F-series pick-ups were once again the top selling vehicle model overall.
  • The Hyundai Elantra was the biggest gainer in sales, up 104.5 percent; the Honda Accord the biggest loser, down 38.9 percent.

The prediction that sales will surge later in the year is not particularly suprising since the third and fourth quarters are traditionally the best for the auto industry. But that should be good news for investors. Here are some of the smallcap auto industry stocks we have been following:

Charlotte, MI-based Spartan Motors (Nasdaq: SPAR, http://www.spartanmotors.com/) makes motor vehicle chassis and bodies for OEMs. Its stock was trading at about $5.50 last fall but dropped to $4.62 mid-day on June 2. For what it is worth, the Wall Street Cheat Sheet this month picked SPAR as a company “to watch” based on the GM results and the general automotive industry.

Milton, GA-based Exide Technologies (Nasdaq: XIDE, http://www.exide.com/) manufactures lead-acid batteries for transportation and industrial energy applications. Its stock price dropped to $4.14 last August, rebounded to $7.40 late last year and ran up as high as $12.68 as the industry came alive in February. But the company, which reports on a fiscal year, missed analysts’  composite June 1 and management predicted a slow first quarter. The result: investors sold off heavily, pushing the stock down more than $2 on June 2 to $7.52.

Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/) makes a heated and cooled seat system now featured in 54 vehicle models manufactured by Ford, GM, Hyundai, Toyota, Nissan, Land Rover and Jaguar, as well as a cupholder for Chrysler.  Amerigon, which recently announced the acquisition of its main competitor, W.E.T. Automotive Systems of Germany, dropped as low as $6 in 2010 and was trading at $11.55 when we last looked last winter. It’s run up as high as $17.64 since then and at mid-day June 2 was trading at $15.84.

Racine, WI-based Modine Manufacturing Company (NYSE: MOD, http://www.modine.com/) manufactures a variety of thermal management products including radiators, engine and transmission oil coolers for the auto industry. This is the stock that Seeking Alpha last November listed as one of “10 Stocks on the Upswing” after noting that its stock price has grown by more than 54.5 percent in the previous year. It was trading at $14.96 late in the day June 2, down from its 52-week high of $17.94 but way above the low of $7.10.

Oak Park, MI-based * Azure Dynamics (AZD.TO, http://www.azuredynamics.com/) supplies electric and hybrid drivetrain systems for commercial vehicles, most notably the drivetrain in the highly watched all-electric Ford Transit Connect. Azure announced in late May an order for 27 of the electric Transit Connects by FedEx, among others. The stock is languishing however. It traded for $0.27 last November and, while it has been as high as $0.41 in the past year it was still stuck at $0.27 on June 2.

* Denotes client of Allen & Caron (publisher of this blog)

Surging Auto Sales Lifting Smallcap Auto Industry Stocks

No doubt everyone (Republicans and Democrats) can agree on the great news now coming out of Detroit: auto sales are surging (http://www.nytimes.com/2010/11/04/business/04auto.html?_r=1&scp=1&sq=nick%20bunkley&st=cse), at least in the U.S.  According to the New York Times and many other news outlets, October was the industry’s best month for new vehicle sales in two years. G.M. reported sales growth of 4.3 percent for the month compared to a year ago, but Ford and Chrysler really took off, with sales growing 19.3 and 37 percent for the month compared to October 2009.

One of the industry’s favorite metrics for demand- the Seasonally Adjusted Annualized Selling Rate (SAAR) – rose to 12.3 million, the highest it has been since September 2008 when the crash began, except for August 2009 when the “cash for clunkers” program offered federal rebates and skewed the numbers, according to the Times story.

More good news: Analysts and industry leaders expect this sales wave to continue through 2011.

Small cap companies in the broad automobile sector have to be celebrating the news. And some have already cashed in ahead of October, based on the 3rd quarter earnings reports that include results through the close of the quarter on September 30. Investors who jumped into this sector in late August have enjoyed remarkable gains.

For instance, Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com/), which makes a heated and cooled seat system now featured in more than 40 vehicle models manufactured by Ford, GM, Hyundai, Toyota, Nissan, Land Rover and Jaguar, just reported its best quarter ever with revenues of $30.5 million. CEO Dan Coker told a conference call audience that $100 million in annual revenue is “a goal we have had for awhile and we are very pleased that it looks like we’re going to get there.” As you might expect, Amerigon stock has been on a tear, peaking at $11.55, up from just more than $6 earlier this year.

Charlotte, MI-based Spartan Motors (Nasdaq: SPAR, http://www.spartanmotors.com), which makes motor vehicle chassis and bodies for OEMs, has seen its stock swing higher since dropping to $3.75 in late August. The stock is now trading at about $5.50 and the company in October reported solid growth in sales and earnings for the third quarter.

Racine, WI-based Modine Manufacturing Company (NYSE: MOD, http://www.modine.com/) manufactures a variety of thermal management products including radiators, engine and transmission oil coolers for the auto industry. Seeking Alpha on Nov. 7 (http://seekingalpha.com/article/235312-10-stocks-in-a-new-uptrend-being-chased-by-smart-money?source=yahoo listed Modine in a roundup titled “10 Stocks on the Upswing” noting that its stock price has grown by more than 54.5 percent in the past year.

Milton, GA-based Exide Technologies (Nasdaq: XIDE, http://www.exide.com) manufactures lead-acid batteries for transportation and industrial energy applications and its stock is following a similar trend. The price dropped to $4.14 in late August but has rebounded with the good news out of Detroit and this week hit nearly $7.40.

Oak Park, MI-based * Azure Dynamics (AZD.TO, http://www.azuredynamics.com/) may be one to watch. Azure supplies electric and hybrid drivetrain systems for commercial vehicles, most notably the drivetrain in the highly anticipated all-electric Ford Transit Connect which should begin selling in earnest in April 2011. The European launch is also expected in the second quarter of 2011. Azure stock currently trades at about $0.27.

* Denotes client of Allen & Caron (publisher of this blog)