High-Risk, High Reward Small Caps
I'll be gathering more small- and mid-cap candidates for my real-money "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:
1. Revenues: $500 million or less
2. Earnings and sales growth: 25% or greater
3. Netprofit margin: 7% or greater
4. Daily dollar volume: $1 million-$25 million
5. Insider holdings: 10% or greater
6. Share price: $7 or greater
7. Relative strength: 90 or greater
8. Operating cash flow: a positive number
The contenders
This month, 11 companies passed the screen, up from 10 in June:
Company | Market Cap(in millions) | Industry | Add to Your Watchlist |
|---|---|---|---|
Akorn (NAS: AKRX) | $1,522 | Pharmaceuticals | |
Altisource Portfolio Solutions | $1,758 | Real estate management/development | |
American Vanguard | $696 | Chemicals | |
Credo Petroleum (NAS: CRED) | $145 | Oil, Gas and Consumable Fuels | |
HealthStream | $690 | Health-care technology | |
Homeowners Choice | $164 | Insurance | |
Liquidity Services (NAS: LQDT) | $1,327 | Internet software and services | |
SolarWinds | $3,156 | Software | |
Spectrum Pharmaceuticals (NAS: SPPI) | $978 | ||
TGC Industries | $199 | Energy equipment and services | |
Western Alliance Bancorporation (NYS: WAL) | $785 | Commercial Banks |
Data provided by S&P Capital IQ.
Western Alliance Bancorporation and Credo Petroleum are new this month. Western is a quiet, regional bank based in Phoenix. It's down 75% from its all-time high, but reported record revenue and net income last quarter.
Credo has really had its ups and downs over the years, but soared over 30%, after announcing this month that it's being acquired by Forestar. The buyout is for $14.50 per share; expect the stock price to hover just below there until the deal closes later this year.
Spectrum Pharmaceuticals has soared for us in the past couple of months, and is now up 44% since hitting the screen in May. Fellow Fool Brian Orelli has three reasons you may want to pick up some shares for yourself.
Liquidity Services mysteriously dropped about 25% earlier this month on no news. Still, our Stock Advisor team continues to like this company because of its strong competitive position, excellent returns on capital, and growth potential.
Finally, Akorn continues its fantastic climb this year. It's now up 31% on the Foolish 8 scorecard, and 110% in the past 12 months. Nick Pugleasa offers a closer look at its turnaround.
I hear CAPS calling
As I mentioned, I'm tracking and scoring each one of my monthly screens now, so we can see exactly how they're performing. We refer to it as a CAPScall around these parts, and the Foolish 8 has its own page. Just add it as a favorite to keep up.
Tomorrow, I'll reveal 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 looking for something to balance out your risky small caps, consider our special free report detailing the best of the steady dividend payers. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks," and it's yours for the taking.
The article High-Risk, High Reward Small Caps originally appeared on Fool.com.
Fool analyst Rex Mooretweetsbut is not a twerp. He runs areal-money portfoliobased on his screens.Motley Fool newsletter serviceshave recommended buying shares of Liquidity Services. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
