Frontline: Small-Cap Standout

02/17/2014 8:00 am EST


Small-cap stocks may have outperformed their mid- and larger-cap peers on a year-over-year basis, yet opportunities within the sector can often go overlooked by investors for bigger-name plays; observes Karee Venema of Schaeffer Investment Research.

One equity that falls under the small-cap umbrella, and looks poised to benefit from a contrarian boon is shipping concern Frontline Ltd. (FRO).

Shares of Frontline have more than doubled in value since hitting a decade-plus low of $1.71 last May. In fact, the stock tagged a new annual high of $5.18 in early January.

The equity entered a brief period of consolidation after notching this notable mark, but the pullback was contained by its 50-day moving average—a trendline that served as support last September.

Not everyone on the Street has bought into FRO's momentum, though, which could translate into a contrarian boost down the road.

For starters, not one of the five covering analysts deems the stock worthy of a "buy" or better rating. Plus, the average 12-month price target of $1.78 stands at a steep discount to the equity's current perch.

The stock could see some fuel added to its fire, should any of these skeptics follow in the footsteps of Jefferies, which raised its price target for the stock.

Elsewhere, despite short interest falling 4.1% in the last two reporting periods, it still accounts for one-fifth of the security's available float.

If FRO maintains its upward trajectory, a continued capitulation by short sellers could create some additional buying power for the stock.

On the fundamental front, Frontline is slated to unveil its fourth-quarter earnings report on Friday, February 28. Following its last turn in the earnings confessional in November, the equity tacked on nearly 10% in the subsequent session.

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