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, 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, 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, , 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,, 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,, 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, 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.


Real Estate Experts Seem to Agree: Home Prices ‘Inching Up’ and Housing Is Back

The housing market is back. That news has been popping up throughout August based in part on the word that storied investor Warren Buffett is “betting big” on housing, according to a Wall Street Journal video featuring housing reporter Joe Light (!432BAEE2-88DB-4382-9496-2DA9F86E3047).

Photo courtesy of

Light brings up some excellent points aimed at the retail investor. They include:

  1. New home inventories are the lowest they have been in almost five decades. As of Aug. 2 there were only 144,000 new homes for sale.
  2. Home prices have started to “inch up,” based on the Case-Shiller Home Price Index and other similar reports.

Light suggests that the most important thing for home prices is momentum, which he says is now in home prices favor. Along with the momentum effect, the other important indicator is price-to-rent ratios, comparing home prices to rents, which are back to the very low level they were at in either 1999 or 2001, depending on what index you are looking at. 

For retail investors, Light says there are two ways to play this improving housing market: either by buying commercial real estate investment trusts which are focused on properties with short leases such as self-storage units where owners can raise the rents quickly as the economy gets better; or by buying home builders. As examples, he listed Lennar and KB Home.

Light’s views on the low supply of newly constructed homes was seconded by J. Allen Smith, chief executive of Prudential Real Estate Investors, owners of about $50 billion in real estate assets. In part of a wide-ranging interview in the Aug. 29 the New York Times, Smith said “new construction starts are so low that even with an anemic economy–one bouncing along at 2 percent growth–the supply-demand fundamentals will continue to improve.” (

Housing prices, even in the hardest hit areas like Miami, Atlanta and Detroit, seem are “inching up” nationally “for the first time since 2010, when sales were helped by a temporary tax credit for home buyers,” according to another story in the Aug. 29 New York Times (

There are several  small cap home builders to choose from, including four we have covered in the recent past.

Red Bank, NJ-based Hovnanian Enterprises (NYSE: HOV, specializes in single-family detached homes, condominiums and town homes and operates in two segments: homebuilding and financial services.  The company’s 52-week trading range shows it was trading for as low as $0.89 last October and then went on a tear, going as high as $3.31 in early February. When we last checked on July 11 it was trading for $2.65 and its market cap was about $350 million. It closed Aug. 31 at  $2.92, up 20 cents for the day, increasing its market cap to more than $370 million.

Los Angeles-based KB Home (NYSE: KBH, is also a home building and financial services company catering in large part to first time buyers. KB is an old Southern California home builder, founded in 1957 and formerly called Kaufman and Broad. Back on July 11 its market cap was $754 million and it was trading for $9.74. It closed Aug. 31 at $11.04, up 17 cents for the day, increasing its market cap to $851 million.

Columbus, OH-based M/I Homes Inc. (NYSE: MHO, builds single family homes primarily in the Midwest, Mid-Atlantic and southern parts of the U.S. The  company was founded in 1973 and, like most of the other builders, has homebuilding and financial services divisions. Back on July 11 its market cap was $331 million and it was trading for $17.50. It closed Aug. 31 at $19.30, up 32 cents for the day, increasing its market cap to $352 million.

Atlanta-based Beazer Homes USA (NYSE: BZH, builds and sells single-family and multiple-family homes in 16 states in the U.S. It also acquires, improves and rents homes. The company operates through commissioned home sales counselors and independent brokers. Back on July 11 its market cap was about $283 million and it was trading for $2.86. It closed Aug. 31 at $2.94, up 6 cents on the day, increasing its market cap to $297 million.

Two home builders we didn’t cover previously, that are both trading near their 52-week highs include:

Irvine, CA-based Standard Pacific (NYSE: SPF, builds single family and detached homes targeting a range of homebuyers. It also provides mortage financing services through its mortage finance subsidiary, Standard Pacific Mortgage. It’s market cap is currently $1.34 billion and 52-week trading range is $2.17-$6.71. It closed Aug. 31 at $6.70 up 14 cents for the day.

Westlake Village, CA-based The Ryland Group (NYSE: RYL, a homebuilder and mortage finance company. RYL covers many aspects of the home buying process including design, construction, title insurance and escrow. Its 52-week range is $9.15-$27.15 and its market cap is $1.21 billion. It closed Aug. 31 at $26.81, up 81 cents for the day.