Finding the right small-cap company to fulfill that short-term, four to six month investment horizon slot in your portfolio can be seemingly difficult at times. Especially hard, given the extraordinary high levels of uncertainty in today's markets. Spartan Motors (SPAR) is a relatively small company operating in the auto and trucking industry. More specifically, SPAR "engineers and manufactures specialty chassis, specialty vehicles, truck bodies and aftermarket parts for the recreational vehicle, emergency response, government services, defense, and delivery and service markets."
As I have outlined in figure 1 below, you will see SPAR is currently trading right around $5 per share and with a total of 33.8 million shares outstanding this puts its market capitalization at approximately 170.5 million. From YTD, SPAR had provided investors with a 7.01% return.
Figure 1: SPAR's Five Year Price Graph from TD Ameritrade
Five reasons SPAR is a speculative play at only $5 per share:
SPAR just recently announced they have been awarded a subcontract order from defense contractor BAE systems. The primary goal of this is to support continuing production of the International Light Armoured Vehicles. Specifically, this subcontract includes an initial order of 24 International Light Armored Vehicles. Shipment will proceed in Q2 2013.
Four analysts that cover this stock have a median price target of right around seven dollars per share.
SPAR's current weighted alpha value is +0.30, which indicated this stock is indeed undervalued. A favorable metric from an investment standpoint.
- SPAR provides investors with a 1.98% dividend yield. There is a high probability of a dividend increase in FY 2013, due to the fact SPAR's new subcontract is going to have a positive impact on its free cash flows.
- For a speculative play, SPAR presents investors will a low level of risk. Relative to the S&P, I computed an average beta over the course of the past year of only 1.7, which is slightly higher than the market beta of one.
SPAR is a company that if you give it the right amount of optimism, may add a favorable yield to your portfolio early on in FY 2013.