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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Record Low Interest Rates Sparking U.S. Automobile Market, Too

Record low interest rates have brought a much needed spark to the housing market in recent months, and some analysts are suggesting they are the reason for the uptick in another important industry: automobiles.

New car showroom photo courtesy of albertretail.blogspot.com

Automobile sales in September were made at the highest rate in four years, according to many reports including the New York Times (http://www.nytimes.com/2012/10/03/business/g-m-and-ford-post-lackluster-sales.html). The Japanese and German manufacturers, however, led the charge with the American car makers posting slightly weaker results. A total of 1.2 million automobiles were sold in September in the U.S., which works out to a 13 percent increase over 2011, according to the New York Times report. For the year, sales are up 14.5 percent over 2011.

Analysts suggest that “historically cheap loans,” new products and “better inventory management” are aiding the auto sales comeback. And fuel economy is one of the most important features sought after by customers.

The auto industry is the home of many small cap companies, many of them suppliers to the big automobile manufacturers. Most have been struggling in recent months due to fears of waning global demand and exposure to Europe, according to reports, and many are considered undervalued so the new strength in US sales has to be good news.

Here are some randomly chosen examples:

Racine, WI-based Modine Manufacturing Company (NYSE: MOD, http://www.modine.com/) develops, manufactures and markets of heat exchangers and systems for use in on-highway and off-highway original equipment manufacturer (OEM) vehicular applications, and to various building, industrial, and refrigeration markets. It offers power train cooling products, including engine cooling modules, radiators, charge-air-coolers, condensers, oil coolers, fan shrouds, and surge tanks; on-engine cooling products comprising exhaust gas recirculation coolers, engine oil coolers, fuel coolers, charge-air-coolers, and intake air coolers; oil coolers consisting of transmission oil coolers and power steering coolers; fuel coolers; and component assemblies and radiators for special applications. MOD operates mainly in the North America, Europe, South America, Africa, and the Asia/Pacific regions. Analysts writing in Investopedia and Seeking Alpha have suggested that if Modine’s current restructuring is successful, it could be poised for a turnaround. MOD’s 52-week trading range is $5.50-$11.64. It closed Oct. 3 at $7.46, down 1 cent on the day. Market cap is $351.5 million.

China-based SORL Auto Parts (Nasdaq: SORL, http://www.sorl.cn/) manufacturers and sells a wide variety automotive brake systems and other safety-related auto parts, mainly in China, although it also exports its products to 104 countries and regions. Its products are mainly used in commercial vehicles, including buses and trucks. On September 24 SORL announced a major contract win with Shaanxi Auto Group to deliver brake parts for the Deloong F3000 heavy-duty trucks. SORL stock is thinly traded, averaging about 24,000 shares a day. It’s 52-week trading range is $1.71-$3.64. It closed Oct. 3 at $1.88, down 1 cent on the day. Market cap is $30 million.

Northville, MI-based Gentherm * (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 applications. It’s also developing more efficient thermoelectric devices. THRM’s Climate Control Seat system, based on its proprietary thermoelectric technology, is being offered in more than 50 vehicles made by the world’s leading automobile manufacturers including Ford, General Motors, Nissan, Toyota, Kia/Hyundai, Land Rover and Jaguar, among others. THRM’s 52-week trading range is $10.06-$17.74. It closed Oct. 3 at $13.11, up 17 cents for the day. Market cap is $388 million.

Torrance, CA-based Motor Car Parts of America (Nasdaq: MPAA, http://www.motorcarparts.com/) remanufactures alternators and starters for import and domestic cars and light trucks. Its products are sold to auto parts retail chains in the U.S. and Canada and to major automobile manufacturers for their aftermarket programs and warranty replacement programs. Its 52-week trading range is $3.96-$10.42. MPAA closed Oct. 3 at $4.55, down 12 cents for the day. Market cap is $66 million.

Pendleton, IN-based Remy International (pink sheets: RMYI, http://www.remyinc.com) is a global vehicular parts designer, manufacturer, remanufacturer and seller of aftermarket and original equipment electrical components for automobiles, trucks and other vehicles. Its products sell primarily under the Delco Remy, Remy and Worldwide Automotive brand names. Its 52-week range is $12.25-$21 and its market cap is $536 million. RMYI stock is listed at $16.83 but did not trade Oct. 3.

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