|Written by Rob Goldman|
In this edition of the Guide, we diagnose the small cap market and highlight 2 recent stock picks, including a new one this morning. But, more importantly, there are several firsts occurring here for Goldman Small Cap Research.
First, our new sponsored report is Prince Mexico S.A., Inc. (OTCQB – KUVE) a newly traded stock that has huge upside. What makes it unique for us is that it is the first sponsored report we have issued that is affiliated with a decades-old household name that is the number one player in its market. In this case, the popular Prince sporting goods, which owns #1 status in tennis and squash. Click the links below to read more about this exciting firm that owns exclusive rights to market Prince’s products in Latin America.
Second, as it is the start of March Madness, we are launching a contest this week that will provide the winner with a popular retailer gift card with a face value of $50. Find out how to play against yours truly and other subscribers by reading The Goldman Guide.
Get Ready For Some Bargains
If the stock market is going up why does it seem like I am not making any money?
This is a popular question asked by retail investors these days. After all, the large cap indices seem to only move in one direction: up. We already passed the double digit consecutive up days on the Dow Jones Industrial Average and are approaching another all-time high on the S&P 500 Index. Heck, even the Russell 2000 Index has shot up like a cannon since the beginning of the year.
Still, it does not feel quite right. For those investors that feel as if they are not fully participating in the upswing, I understand their plight all too well if their portfolios are over-weighted in low-priced stocks. While the early part of the 2013 bull market run was led by retail dollars flowing into equity funds and individual small stocks that were battered late last year, the upswing of the past 2 weeks or so has clearly been driven by institutional investors. So, all of the index funds that mirror the big indices are rocking while the lower prices stocks are left in the dust. That plays to the Russell 200 Index’s composition as well.
What is the proof that low-priced stocks have been overlooked? Simple. Every day, I review the stocks that have achieved new highs, as I use this measure as one of many sources of blog topics here at Goldman Small Cap Research. Since the beginning of March, the number of stocks priced below $5.00 that have reached new 52-week highs has dropped dramatically while the number of stocks that carry much larger price tags now dominate this metric.
As of midday Friday, 44 new securities (including warrants) have achieved new 52-week highs on this trading day. However, of the 44, only 12 are unaffiliated with Fannie Mae or Freddie Mac securities. In other words, 32 of the 44 securities are various vehicles and classes of stock associated with either Fannie Mae or Freddie Mac. That is ridiculous. (Of course it also indicates that perhaps the real estate and mortgage markets continue to be under solid accumulation, but that is a story for another day.)
Plus, only half of the 12 non-Fed agency related stocks trades below the $5.00 mark. What does all of this mean?
In our view, these oddities indicate that small stocks are not under accumulation and have been widely overlooked and are thus undervalued. This is not an uncommon occurrence during secular, big cap bull markets. What usually follows is the realization that the larger cap stocks are overvalued and overbought and a selloff ensues. As the carnage occurs, smart stock investors seek out undervalued small stocks for purchase on the cheap.
We think that time is coming soon. So for those of you concerned that your small stocks are underperforming, do not worry as your time will soon come. For those of you seeking bargains in small stocks, it may be Christmas in April.
In Case You Missed It...
It’s rare that we feel like we really need to pound the table on our sponsored research picks, but in these 2 cases, we are compelled to highlight our most recent profiles, including the one released this morning.
Goldman Small Cap Research Contest
As this week marks the beginning of March Madness, we thought it would be appropriate to make week-by-week selections. After all, all work and no play, makes investing a dull and unprofitable venture. With that in mind, why don’t you join us in our online bracket pool? The player with the winning bracket (or player with most points according to (www.cbssports.com automatic scoring system) will receive a gift card with a face value of $50 in the mail. We will be keeping the name of the retailer a surprise until the final week.
All you have to do to enter is like us on Facebook and shoot me an email (firstname.lastname@example.org) by Thursday at 9AM EST to receive instructions on how to enter your bracket in our group. To get into the right spirit, here are my off-the-cuff Sweet Sixteen Picks. Not final, but it is pretty close.
Until next week….
Analyst: Robert Goldman
Rob Goldman founded Goldman Small Cap Research (GSCR) in 2009. Rob has over 20 years of investment and research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, he was a senior member of Piper Jaffray's Technology team. Prior to joining Piper, Rob led Josephthal & Co.'s Emerging Growth Research Group. Rob has also served as Chief Investment Officer of two boutique investment management firms, where he managed Small Cap Growth and Balanced portfolios and The Blue and White Fund. As an investment manager, Rob's model portfolio was once ranked the 4th best small cap growth performer in the U.S. by Money Manager Review. In addition to his work at GSCR, Rob is the editor of Penny Stock Junction (www.pennystockjunction.com.)
I, Robert Goldman, hereby certify that the view expressed in this newsletter accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research publication.
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap and mid cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This report or newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This report or newsletter does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com.