The market is off to a strong and surprising start to 2013 with "Risk On" sentiment driving the markets. I am shifting more of my portfolio into the small cap area as I think M&A activity will pick up in 2013 and the space has little exposure to Europe which I believe will be in a long term economic downturn. The stocks also are less picked over and followed as their large cap brethren. Larger companies should also be picking up their pace of acquisitions in the medium term as organic growth is challenging currently. Here are two $3 small cap names with solid revenue growth projections to consider. They both are good values even without a "buyout kicker". Both also recently receive positive comments from analysts.
Himax Technologies (HIMX) designs and manufacturers semiconductors for flat panel displays.
4 reasons HIMX can go higher from just under $3 a share:
- The company is expected to grow revenues by 12% in FY2013 and over 25% in FY2014. The stock sports a minuscule five year projected PEG (.52).
- Himax has a solid balance sheet with approximately 15% of its market capitalization and yields 2.2%.
- Bank of America just reiterated its "Buy" rating on the stock and raised its price target to $3.80 a share.
- The stock is cheap at less than 7x 2014's projected EPS and just 14% above its book value.
McEwen Mining (MUX) mines gold, silver, and copper. It holds interests in various properties located in the state of Nevada, Mexico, and Argentina.
.4 reasons MUX is undervalued at $3 a share:
- Stifel Nicolaus just initiated the shares as a "Buy" with a $3.75 a share price target.
- The company has net cash on its balance sheet and the stock sells for just 99% of book value. The stock is selling at a little over 14x forward earnings.
- Revenue is expected to increase more than 50% this year. Stifel believes McEwen will grow gold production to 136,000 ounces this year and over 300,000 ounces by FY2017.
- Prior to Stifel Nicolaus, only two analysts covered the stock. One has a price target of $3.75 a share and the other is north of $7 a share. As the company's revenues continue to increase, I would anticipate greater analyst coverage.