High-Risk, High-Reward Small Caps
This article is part of ourRising Star Portfolios series.
I'll be gathering more small- and mid-cap candidates for my Rising Star "multivitamin" portfolio over the next few days, using my Foolish 8 and modified Foolish 8 screens. Today I present the Foolish 8, which was developed by Motley Fool co-founder David Gardner to identify profitable, rapid-growth, small-cap stocks. Here are the eight criteria:
- Revenues: $500 million or less.
- Earnings and sales growth: 25% or greater.
- Net profit margin: 7% or greater.
- Daily dollar volume: $1 million to $25 million.
- Insider holdings: 10% or greater.
- Share price: $7 or greater.
- Relative strength: 90 or greater.
- Operating cash flow: a positive number.
This month, 10 companies passed the screen:
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Altisource Portfolio Solutions (NAS: ASPS)
CVD Equipment (NAS: CVV)
Financial Engines (NAS: FNGN)
Portfolio management services
Gulfport Energy (NAS: GPOR)
Oil and gas
Hi Tech Pharmacal (NAS: HITK)
IPG Photonics (NAS: IPGP)
SolarWinds (NYS: SWI)
Source: S&P Capital IQ.
New stocks on the list this month are Altisource Portfolio Solutions and Hi Tech Pharmacal. Dropping off the list from last month are Cohen & Steers, Exlservice Holdings, and Preformed Line Products.
Here's a look at some interesting metrics for these small fries:
Altisource Portfolio Solutions
Hi Tech Pharmacal
Source: S&P Capital IQ. P/E = price-to-earnings ratio; EV = enterprise value; FCF = free cash flow; TTM = trailing 12 months; ROE = return on equity; NM = not meaningful.
On Monday I'll show you the results of this month's modified Foolish 8 screen and then talk about the companies that interest me from both screens in more depth.
If you're interested in keeping up with any of these companies, add them to your free watchlist by clicking the "add" button in the far-right column of the top table. You can also follow me on Twitter and check out the multivitamin discussion board.
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At the time this article was published Fool analyst Rex Moore reminds you that time always holds the winning hand. He owns no companies mentioned here. The Motley Fool owns shares of IPG Photonics. Motley Fool newsletter services have recommended buying shares of IPG Photonics and Interactive Intelligence Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.