Small Laggards: Suggestions for Chasing the Market

by: Alan Brochstein, CFA

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Playing "Catch-up"? My article from last weekend, "15 Stocks Having a Tough Quarter, But Worth a Look" drove the most traffic to my websites in over a year. It tells me that the crowd is looking for beta, not alpha. There's probably a whole other story here, but rather than talk about why I think everyone is downright silly chasing stocks, I will offer more ideas to investigate.

In that last article, I narrowed the 40 stocks in the S&P 500 down QTD, leaving just 15 companies worth investigating. Today, I will offer up the same screen but on the Russell 2000, but I tightened it up to restrict to companies with cash in excess of debt. I also eliminated any company with estimates declining in excess of 10%. The data is as of Tuesday's close. Here it is (click to enlarge):

R2000 Stocks Correcting

Most likely, you aren't too familiar with most of these companies. I know a few of them. In the Industrials, I actually own Met-Pro (NYSE:MPR) in an account I manage and both the Top 20 Model Portfolio and the Conservative Growth/Balanced Model Portfolio. Buckle (NYSE:BKE) had a stellar year in 2008 and is strong this year as well. I saw that they jacked the dividend the other day. WD-40 (NASDAQ:WDFC) is one that you may know. It is a bit too slow of a grower for me, but it has a long history of above-market dividend yield.

In the Healthcare sector, which covers about 1/2 the names, I will point out ICU Medical (NASDAQ:ICUI). Some of you may know that I have had a lot of interest in the Med-Tech sector, specifically in high GM stories like this one (with predominantly consumables). This one is run by George Lopez. He is an amazing guy, but not the comedian that I like so much (the Mexican Bill Cosby). I digress...

Big picture, this list was roughly unchanged in price in 2008 during the mother of all bear markets, and it is down just slightly. Some of these stocks are probably correcting mistakes from last year, but some are probably just correcting period. If you are looking for potential long ideas, all of these stocks are in uptrends and probably worth a look.

Disclosure: Long MPR