Many of the stocks analysts are recommending right now are not big names. They are relatively smaller companies, with market caps between $300 million and $5 billion. Investors can pick them up for less than $20 a share and enjoy the dividends they carry as well as the strong growth analysts are predicting. Each company on our list was rated by analysts as 1.5 or higher on the analysts’ recommendation scale, where 1.0 is a ‘strong buy’ and 5.0 means ‘sell’. Our list includes a technology company, two telecommunications companies, a business products company, a testing equipment company, a personal services company and a pigment manufacturing company:
ABB, Ltd. (ABB) is a company that makes automation technologies for companies worldwide. It offers a dividend yield of 3.60% and is rated 1.4 on the analysts’ recommendation scale. It is currently trading at $19.23 but it has a one year estimate of $30.72. ABB’s closest competitor is Semens AG (SI). Siemens has a market cap roughly twice ABB’s ($89.59 billion vs. $44.04 billion) but ABB is reporting much higher growth (27.80% vs. SI’s 2.40%) and a higher gross margin (30.76% vs. SI’s 29.85%). Fund manager Ken Fisher is very bullish about ABB. He has more than $537 million of his Fisher Asset Management fund invested in ABB.
City Telecom H K Ltd (CTEL) provides telecommunication services to clients in Hong Kong and Canada. It offers a dividend yield of 8.10% and carries the strongest analyst recommendations possible – a 1.0 on the analysts’ recommendation scale. It is a smaller company. City Telecom has a market cap of only $353 million, but it has stronger growth than its closest competitors. City Telecom reports quarterly revenue growth over 5.0% compared to the 3.3% gain enjoyed by PCCW, Ltd. (OTCPK:PCCWY) or the 1.6% loss sustained by New World Development Co. Ltd. (OTCPK:NDVLY). Jim Simons has $1.1 million of his Renaissance Technologies fund invested in City Telecom after increasing the stake by 6% in the second quarter.
Ennis Inc. (EBF) creates business forms like product tags and printed envelopes. It also has divisions that specialize in point-of-sale advertising and branded apparel. Ennis is rated by analysts as a strong buy, earning a 1.0 on the analysts’ recommendation scale. It offers a 4.50% dividend yield and is expected to nearly double over the next year. Ennis is currently trading at $13.90, with a one year estimate of $22.40. It is one of the larger companies in its industry. Ennis has a market cap of $362 million compared to its nearest competitor, the $195 million market cap company Cenveo Inc. (CVO). Ennis also has a higher gross margin (27.12% vs. CVO’s 19.00%), as well as higher net income. Ennis is a smaller company but it has some big name interest. For instance, Chuck Royce's Royce & Associates fund has position in the company worth more than $37.5 million.
Electro Rent Corporation (ELRC) rents, leases and sell test and measurement equipment. Analysts give this stock a 1.00 on the recommendation scale and it offers a 5.50% dividend yield. It recently traded at $14.60 but one year estimates place the stock at $24 a share. According to Yahoo! Finance, Electro Rent recently received a Preferred Supplier Award from L-3 Communication for its “ethical conduct, customer support and operational excellence.” Electro Rent is smaller than its closest competitor, McGrath Rentcorp (MGRC). It has roughly half the market cap ($347 million vs. McGrath’s $613 million) but analysts are not nearly as bullish about McGrath as Electro Rent. Amongst the hedge funds we track, Jim Simons’ fund and Chuck Royce’s fund own positions in Electro Rent, valued at $13.3 million and $3.6 million respectively.
Hillenbrand, Inc. (HI) is a two platform business. It is in the funeral supply business, but it also has a division devoted to industrial processing equipment. Analysts are recommending Hillenbrand at 1.3. It offers a 3.90% dividend yield and is expected to grow in share price from $19.82, where it is trading now, to $27.33 a share within a year.
IDT Corporation (IDT), the telecommunications and energy company, is another bullish pick for Jim Simons. His fund holds a $26.5 million stake in IDT. Jay Petschek and Steven Major’s Corsair Capital Management fund owns a slightly smaller position at $20.5 million (check out Jay Petschek and Steven Major’s favorite stocks. IDT has a dividend yield of 5.40% and carries an analyst recommendation of 1.5. It recently traded at $18.06 but is expected to more than double. Its one year estimate is $40.50.
Kronos Worldwide, Inc. (KRO) is a titanium dioxide pigments manufacturing company. It has a 3.60% dividend yield. It recently traded at $18.72 but is expected to grow to $35 a share within the next 12 months. Kronos has a $2.17 billion market cap and a 1.3 analyst recommendation. Kronos' closest competitor is the Huntsman Corporation (HUN). Huntsman has a slightly larger market cap at $2.42 billion, but Kronos has stronger quarterly growth (41.40% vs. Huntsman’s 25.20%). Kronos was very popular with hedge funds during the second quarter. John Brennan bought a $20.5 million position for his Sirios Capital Management during the second quarter while Glenn Russell Dubin bought a $20.2 million position for his Highbridge Capital Management.