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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Tech Stocks Near Seven-Year Lows, But Some Say ‘Buyer Beware’

Is it time to buy tech stocks? You might think so if you just read the headline above this week’s

Photo courtesy of berfrois.com

Photo courtesy of berfrois.com

Bloomberg News article heralding that tech stocks are “the cheapest in seven years” (http://www.bloomberg.com/news/print/2013-04-28/tech-stocks-cheapest-in-seven-years-as-profit-estimates-decline.html).

But tech stocks, which Bloomberg reports make up “the second-best industry of the past decade,” could be headed for more losses since many analysts have reduced profit estimates for the second quarter of 2013. Government spending cuts and reduced spending by consumers have prompted analysts to predict that earnings at computer companies will fall 5.5 percent in the second quarter, according to the Bloomberg story.

If you are a bull, the low cost of technology stocks may just be too hard to pass up. If you’re a bear, the spending cuts plus the weakening economies in Europe and China make it the wrong time to start buying technology stocks.

Two large cap tech stocks–Apple and IBM–are examples of the low prices in the technology sector. Apple closed out the week of April 22-26 at $417.21, “41 percent lower than the peak reached in September,” according to the Bloomberg story. Apple jumped up a bit from there, and at mid-day May 2 was trading at $447.83, up $8.54. IBM shares have been tumbling as well as the company missed forecasts for the first time since 2005, Bloomberg reported.

So “buyer beware” may be the takeaway from this report for tech stocks in May. Here are five small cap tech stocks chosen randomly so do your homework before investing.

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, up 77 cents, with a market cap of $229 million.

Petaluma, CA-based Calix Inc (NYSE: CALX, http://www.calix.com/) provides broadband communications access systems and software for fiber- and copper-based network architectures that enable communications service providers to connect to residential and business subscribers. CALX has a Unified Access Infrastructure portfolio made up of carrier-class hardware and software products. In February 2011 Calix acquired Occam Networks and in November 2012 acquired Ericsson’s fiber access assets. CALX’s 52-week trading range is $4.25-$9.48. At mid-day May 2 it was trading at $8.64, up 43 cents with a market cap of $422.5 milllion.

Naperville, IL-based Tellabs Inc. (Nasdaq: TLAB, http://www.tellabs.com/) designs and markets equipment and services to communications services providers worldwide, enabling them to deliver wireless and wireline voice, data and video services to business and residential customers. Its customer base includes distributors, OEMs, system integrators and government agencies. Its 52-week trading range is $1.90-$3.89. at mid-day May 2, TLAB was trading at $2.04, up 3 cents, with a market cap of $746 million.

Oakland, CA-based Zhone Technologies (Nasdaq: ZHNE, http://www.zhone.com/) designs and manufactures communications networks equipment for telecommunications, wireless and cable operators worldwide. Its products enable network service providers to migrate from traditional circuit-based networks to packet-based networks and from copper-based access lines to fiber-based access lines without abandoning their existing infrastructures. Zhone makes the MXK Multi-service Terabit Access Concentrator or MXK. It’s 52-week trading range is $0.40-$1.24. At mid-day May 2, ZHNE was trading at $0.98, up 4 cents, with a market cap of $30.5 million.

San Jose, CA-based NetGear Inc (Nasdaq: NTGR, http://www.netgear.com/) is a global networking company that operates in three business units: retail, commercial and service provider. Products include Ethernet switches, wireless controllers, internet security appliances, unified storage products, routers, IP telephony products and many more. Its 52-week trading range is $26.82-$40.97. At mid-day May 2 NTGR was trading at $29.31, up 42 cents with a market cap of $1.1 billion.