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Values in the market are scarce after a five month rally. The only area that consistently provides long candidates is the small cap arena. Here are two small cap stocks with dirt cheap valuations and net insider buying over the last six months.

Metalico (MEA)

Business description from Yahoo Finance (see here):

Metalico, Inc., through its subsidiaries, engages in scrap metal recycling and lead metal products fabricating activities primarily in the United States. Its Scrap Metal Recycling segment collects industrial and obsolete ferrous and non-ferrous scrap metals; processes into reusable forms; and supplies the recycled metals to electric arc furnace mills, integrated steel mills, foundries, secondary smelters, aluminum recyclers, and metal brokers, as well as to exporters and international brokers.

4 reasons Metalico like a good play at under $4 a share:

  • The stock looks like it has bottomed and recently crossed its 100 day moving average (see chart, click to enlarge images):

  • An insider bought 100,000 shares at higher prices in September.
  • The stocks is selling at the bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
  • The median analysts' price target on Metalico is $6.50. In addition, MEA's forward PE is under 8 and sells for 97% of book value.

Callon Petroleum (CPE)

Business description from Yahoo Finance (see here):

Callon Petroleum Company engages in the acquisition, exploration, development, and production of crude oil and natural gas properties in the onshore in Louisiana and Texas, and the offshore waters of the Gulf of Mexico. As of December 31, 2010, its estimated net proved reserves totaled 13.6 million barrel of oil equivalent, including 8.1 million barrels of oil and 33.0 billion cubic feet of natural gas.

4 reasons CPE is a solid buy at under $7 a share:

  • Insiders have been net buyers of the stock over the past six months.
  • The stock is showing increasing technical strength and just recently crossed its 200 day moving average (see chart):

  • The company has significantly beat earnings each of the last three quarters. In addition, consensus estimates for FY2011 and FY2012 have increased in the last three months.
  • CPE is selling for less than 4 times operating cash flow and a low five year projected PEG of .87.
Source: 2 Small Cap Stocks Under $10 With Net Insider Buying