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(0:25) - Increased Volatility Creating Value
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(3:00) - Small Cap Value Stock Screener
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(4:30) - Tracey's Top Stock Picks
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13:45) - What Else To Know About Small Cap Stocks
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(16:00) - Episode Roundup: CAL, JILL, KEM, HVT, MHO
Welcome to Episode #80 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
The stock market has finally had a correction and volatility has picked up.
Could 2018 be the year that value stocks finally come back into favor?
So far, small cap value stocks continue to under-perform. Two of the popular small cap value ETFs, the Vanguard Small Cap Value ETF (VBR) and the iShares S&P Small-Cap 600 Value ETF (IJS) are down nearly 4% year-to-date.
But corrections are also a time to look for buying opportunity. Many of the small cap stocks have weakened.
Screening for Small Cap Value Stocks
There are a lot of small cap companies, where do you start if you want to invest?
To separate the wheat from the chaff, Tracey used the following criteria.
She screened for stocks with market caps under $1.5 billion, a price-to-sales ratio under 1.0, which usually means a company is undervalued, and looked for Zacks Ranks of #1 (Strong Buy) and #2 (Buy).
The high Zacks Rank should hopefully mean rising earnings estimates.
This screen returned 48 stocks, which was more than enough to find 5 top names.
5 Small Cap Value Stocks That are on Sale
1. Caleres, Inc. CALowns many well-known footwear brands including Via Spiga, Naturalizer, Dr. Scholl’s and Bzees. It operates 1200 retail stores, sells on its websites and also sells through major department stores. It’s cheap, with a P/S ratio of just 0.4. Shares are down over 14% year-to-date.
2. J. Jill JILLsells women’s casual apparel and accessories. It has a market cap of just $350 million. Shares are off their 2017 lows, but are still cheap. J. Jill is a classic value play with a forward P/E of 9.4, a P/S of 0.5, and a PEG of 0.6.
3. Kemet Corporation KEMsupplies electronic components around the world. It has a market cap of $983 million. Shares are actually up double digits on the year but are still cheap, with a P/S ratio of only 0.9 and a forward P/E of 11.4.
4. Haverty Furniture HVThad a rough 2017. This furnishing retailer has over 100 show rooms in 16 states. Founded in 1885, it has seen it all. Earnings fell in 2017 but are expected to rebound 26.3% in 2018. It has a price-to-sales ratio of only 0.5.