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.

Advertisements

LED: Looking alot Like Lighting’s Future

Our interest in small cap lighting companies was piqued this week with the announcement April

Photo courtesy of trinamao.en.busytrade.com

Photo courtesy of trinamao.en.busytrade.com

25 that New York-based ForceField Energy (OTCQQB: FNRG) had signed a letter of intent to acquire a 60 percent interest in 1-800 NY Bulbs.

The combination seems to make sense. During its 25 years of existence, Bulbs has more than 8,000 commercial clients, is an authorized dealer and distributor of GE Lighting Products and has projected about $5 million in revenue in 2013, according to the press release announcing the letter of intent. ForceField is focused on renewable energy, energy efficiency and LED (Light Emitting Diode) products.

LED lights are the latest in modern technology and energy efficiency, but have been slow to become the standard in households because of their price, according to Time magazine (http://business.time.com/2013/04/25/light-switch-why-youll-start-using-led-bulbs-this-year/). But the Time report suggests LED prices are coming down. Also, the Energy Independence and Security Act, passed in 2007, requires lightbulbs to become more energy efficient  and has led to the phasing out of standard 100-watt and 75-watt incandescent bulbs, with the 60-watt and 40-watt bulbs to follow.

So the day of the LED light could be near, as could be an intriguing jolt of energy to small cap lighting companies.

FNRG (http://www.forcefieldenergy.com) is a lightly-traded, $87 million market cap, pink sheet company with a 52-week trading range of $2.20-$5.64. It is also involved in transforming waste heat from manufacturing and other sources into electricity. It owns 51 percent of TransPacific Energy Inc. FNRG closed April 26 at $5.35, no change for the day.

Charlotte, NC-based Revolution Lighting Technologies (Nasdaq: RVLT, (http://www.nexxuslighting.com/) designs, manufactures and sells commercial grade LED replacement light bulbs and LED-based signage under the Array Lighting and Lumificient brands (Lumificient Corporation is a subsidiary). It was formerly called Nexxus Lighting and operates mainly in the global commercial, hospitality, institutional, retail and sign markets. RVLT closed April 29 at a 52-week high of $4.01, up 45 cents for the day with a market cap of $140 million. Its 52-week trading range is $0.11-$4.01.

Cincinnati-based LSI Industries (Nasdaq: LYTS, http://www.lsi-industries.com/) is 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. Its 52-week trading range is $5.81-$7.77. It closed April 29 at $7.09, up 18 cents for the day, with a market cap of $170 million.

Solon, OH-based Energy Focus Inc (OTC Pink: EFOI, http://www.energyfocusinc.com/) makes LED lighting products as well as products based fiber optic and other energy-efficient technologies. EFOI focuses on the government and public sector markets, as well as the general commercial and pool markets. Its 52-week trading range is $0.16-$0.40. It closed April 29 at $0.22, up 3 cents for the day, with a market cap of $8.4 million.

Signs of Progress: Digital Media Stocks on Display

If you want to see the latest forms of digital signage, take a look at  Times Square on New Year’s Eve. Digital displays, in all their electronic glory, are literally everywhere on that night. But thanks to the rapid growth of the digital media industry, digital signage displays showing video or television programming, advertising, even menus and street signs, are popping up everywhere.

LCD or LED signage, as well as plasma displays or projected images, have taken over cities, retail stores, hotels, restaurants, corporate buildings, even bathrooms and elevators. Smartphones, too, use the same digital media technology.

You can use digital media technology for integrating social and location-based interactivity so you can send Twitter messages, SMS and text messages to advertising displays. Digital signage displays can be controlled by personal computers or servers via proprietary software programs.

To date, China has led the world in the number of digital signage displays with the country’s largest digital signage firm, Focus Media Holding (Nasdaq: FMCN), operating thousands of displays. San Antonio, TX-based Clear Channel Outdoor Holdings (NYSE: CCO) is another huge outdoor advertising company with close to 1 million displays in more than 40 countries across five continents. But those are large companies with market capitalizations in the billions of dollars.

Smallcap investors have opportunities to invest in digital media, too, by focusing on such things as the hardware, software or network infrastructure that support

Times Square, New Year's Eve

the industry.

Brookings, SDbased Daktronics (Nasdaq: DAKT, http://www.daktronics.com/) designs, manufactures, and sells various electronic display systems and related products. It offers indoor and outdoor scoreboards, digit displays, scoring and timing controllers, statistics software, and transportation products comprising various light emitting diodes-based displays for road management, parking, mass transit, and aviation applications. The company did pay a dividend in December, even lumping an additional $0.40 on top of the regular payout, which is now twice rather than once per year. DAKT trades about 150,000 shares daily, has a market cap of $340 million and a 52-week range of $8.00 – $12.25. It closed April 20 at $8.08, up 1 cent.

Cincinnati, OH-based LSI Industries (Nasdaq: LYTS, http://www.lsi-industries.com/) provides corporate visual image solutions around the world.  The company offers exterior and interior visual image elements related to graphics for use in graphics displays and visual image programs. Its graphics products include signage and solid state LED video screens for the sports and advertising markets designing and engineering custom designed electronic circuit boards, assemblies, and sub-assemblies used in various applications.  LYTS trades near $7 with a $165 million market cap and an average daily volume of about 600,000 shares.  The 52-week range is $5.45 – $8.91. It closed April 20 at $6.71, no change on the day.

Prague-based Kit Digital (Nasdaq: KITD, http://www.kitd.com/) provides end-to-end video asset management software and related services to enterprise clients. It offers the KIT Video platform for managing Internet protocol (IP)-based video assets across browser environments, mobile and tablet devices, and connected television (TV) sets and Digital Signage. KITD also enables delivery of social video apps to connected TVs, set-top boxes, game consoles, tablets and smart phones.  KITD has had some hiccups lately. Its stock has a 52 week range of $5.93 – $12.73, a market cap of about $360 million and an average daily volume of about 1, 265,000 shares.  In March and April 2011, the company announced delayed their 10-K filing and announced changes in the board of directors and management as well as some indications that the company may be putting itself up for sale.  But it appears there has been some short covering and buying in the past weeks. The stock closed April 20 at $6.99, down 51 cents on the day.

Seattle-based RealNetworks (Nasdaq: RNWK, http://www.realnetworks.com/) makes the RealPlayer media player software on computers, including features and services that enable consumers to discover, play, download, manage, and edit digital video. RNWK develops and markets software products and services that enable the creation, distribution, and consumption of digital media and signage, including audio and video.   RNWK has a 52-week range of $6.81 – $15.08, trades nearly 140,000 shares daily, and has a $326 million market cap. It closed April 20 at $9.43, up 3 cents on the day.

A more vertically and horizontally integrated company is Poland-based ADV Group* (ADV’s ADR is GPVSY, http://www.grupa-adv.pl/) which trades on the OTCQX market in the U.S. (www.otcqx.com.) (ADV shares also trade on the main floor of the Warsaw Stock Exchange under symbol ADV.) A fast-growing internet and digital media advertising company, ADV is the leading new-media agency in Poland operating in digital communications, innovative new technologies, IT outsourcing, dedicated application design, and mobile device applications.  GPVSY has enjoyed revenue and earnings growth for the past few years, including 74 percent revenue growth in 2011.  GPVSY is a relatively unknown stock in the U.S. with very little analyst coverage. Its market cap is just under $50 million and its average daily trading volume is less than 100,000 shares daily.  The Polish ordinary listed ADV stock trades over 14 PLN or zloty – the Polish currency. (1 Polish zloty = 0.31 US dollars as of April 12) and has a 52-week range of 7.10 – 15.59 PLN.

*Client of Allen & Caron, publisher of this blog.