I am by nature, a deep value investor. A good portion of my portfolio is allocated to high yielding equities. Both energy MLPs and niche REITs make up a substantial part of the portfolio on the income side. A significant portion of the rest of my portfolio is allocated to more traditional value stocks like Microsoft (NASDAQ:MSFT), which I recently profiled. However, I do like to put some money into fast growing small capitalization equities as well as smaller cyclicals that have taken a recent shellacking in the market but whose prospects are improving.
Here are two stocks in my portfolio that meet those criteria. Both cost around $4 a share, have solid net cash positions on their balance sheets, could have substantial upside and should be considered by more aggressive investors.
Zix Corporation (NASDAQ:ZIXI) provides email encryption solutions in software as a service model in the United States.
4 reasons ZIXI has upside from just under $4 a share:
- I first profiled ZIXI in late July when it was trading at $2.50 a share. The stock is still attractively priced at 16x 2014's projected earnings.
- The company is growing revenues rapidly. Analysts expect around 15% annual revenue growth over each of the next two years. The stock sports a five year projected PEG of around 1 (1.03).
- Zix has a solid balance sheet with over 10% of its current market capitalization. An insider picked up 8,000 new shares in early March. It was the first insider purchase since August.
- The three analysts that cover the stock have price targets ranging from $5 to $5.50 a share. It also recently settled a patent infringement lawsuit.
Power-One (NASDAQ:PWER) manufactures power supply products for the renewable energy, servers, storage and networking, telecommunications, industrials, and network power systems industries worldwide.
4 reasons PWER is undervalued at $4 a share:
- The company has a fortress balance sheet with almost 60% of its market capitalization in net cash on the books.
- Subtracting cash, PWER is selling at approximately 6x 2014's projected earnings.
- The 11 analysts that cover the stock have a $5 median price target on the shares. Northland Capital initiated the shares as an "Outperform" in late February.
- Power-One was a $10 stock less than two years ago. Prospects for the solar industry have started to turn around and an industry heavyweight First Solar (NASDAQ:FSLR) has climbed some 40% over the last month. PWER has long term technical support at around $4 a share as well (See Chart).