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 via 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, eight companies passed the screen:
Market Cap (in millions)
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AeroVironment (NAS: AVAV)
Aerospace and Defense
Altisource Portfolio Solutions (NAS: ASPS)
Real Estate Management and Development
Semiconductors and Semiconductor Equipment
Hi Tech Pharmacal (NAS: HITK)
IPG Photonics (NAS: IPGP)
Electronic Equipment, Instruments and Components
Mercadolibre (NAS: MELI)
Internet Software and Services
SolarWinds (NYS: SWI)
Twin Disc (NAS: TWIN)
Source: S&P Capital IQ.
New stocks on the list this month are AeroVironment, Mercadolibre, and Twin Disc. Dropping off the list from last month are Financial Engines, Gulfport Energy, Interactive Intelligence, Transcend Services, and Virtusa.
Here's a look at some interesting metrics for these small fries:
Altisource Portfolio Solutions
Hi Tech Pharmacal
Tomorrow 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 serviceshave recommended buying shares of Interactive Intelligence, IPG Photonics, AeroVironment, and Mercadolibre. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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