Undercovered, Affordable and Working: A Great Pond to Fish In

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 |  Includes: AHGP, ANSS, ANST, ASTE, AZPN, CEMJQ, CMLP, CNS, CRS, CRZO, CXG, DNEX, DRQ, EPAX, HBG, HITT, HL, HURN, IIVI, IMA, IPAR, ITRI, KMT, KSU, MIDD, MORN, NUAN, OAOFY, OII, PCR, PDCE, PKD, PLLL, SPAR, VLCM, VTIV, WAB, WHQ
by: Alan Brochstein, CFA

At the end of the first quarter, I suggested that some of the strong performers year-to-date might have further upside.

Specifically, using Stockval, I had identified 25 stocks (excluding one that had a cash acquisition offer) that were not widely followed and had good growth prospects.

Thus far in Q2, with the most comparable index, the Russell 2000, up 3.71%, the list has returned an average of 6.25%:

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After creating that screen, I put some more thought into what I was trying to accomplish and modified it somewhat, creating what I call the “Small-Cap Rocket Report”, which I publish monthly. The parameters are included below, along with the list that generates as of the close on 5/11. The names have been fairly stable.

I have spent some time getting to know these stocks, several of which are definitely worth getting to know better. What I find most interesting is that this list of high-growth companies has a median PE of just 20.3.

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AB2

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A few that look quite interesting to me include AZPN, EPAX and MIDD. Several are overdone in the short-run but might be worth a look upon consolidation: DNEX, PCR, WHQ.

Disclosure: No position in any stock mentioned except ANSS