Quickel's Picks: 4-Pack of Small Caps

10/05/2016 9:00 am EST


The selling may not be over. The economy is sluggish without fiscal stimulus. Earnings growth is slower. Business and consumer spending lags, cautions Stephen Quickel, editor of US Investment Report.

.So as true believers in market cycles, we are prepared for now to wait patiently for the inevitable next upcycle.

Meanwhile, our recommended stocks — their current elevated valuations notwithstanding — are still out-performing the market indexes for the three benchmark periods measured—namely, the last three weeks, the two months since the market stalled in July, and the February bottom of the January market plunge.

By far the most powerful common denominator behind our stocks’ rapid appreciation is superior long-term earnings growth.

Meanwhile, here is what we like most about four lesser-known, smaller cap newcomers to our watch list:

Nutrisystem (NTRI) is the best-known thanks to incessant TV ads promising wondrous results from its weight management products and services.

A proven business model and steady 18% earnings growth justify its 21 P/E and 1.20 PEG. All 5 analysts call it a Strong Buy.

MarineMax (HZO) is a small-cap Clearwater, FL retailer of luxury boats and yachts.

Estimates of 30% a year earnings growth followed its stellar second-quarter report of 75% higher pretax profits on 40% higher revenues. Analysts target 25 from today’s price of 18.

DTS Inc. (DTSI), a small cap formed in 1993, delivers top-quality sound to 2 billion listeners’ network-connected devices worldwide.

Trading high in its 52-week range but still at an attractive forward P/E ratio of 15 and a PEG ratio of 0.93, it’s projected to boost earnings 90% in the next 12 months.

Lumentum Holdings (LITE) deals in optical communications products for telecom and data center customers.

With revenues of over $1 billion, it’s projected to lift earnings 85% in the coming 12 months. Of 13 analysts, 8 rate it a Strong Buy at just a shade off its high.

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By Stephen Quickel, Editor of US Investment Report

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