I am looking to increase my exposure to the financials due to the cheap valuations available there as well as my portfolio's underexposure to the sector. I have some big cap exposure with the money center banks like JPMorgan Chase (JPM) and Morgan Stanley (MS). Unfortunately, I have no exposure to the small cap space of this sector. One small cap, unique financial stock that looks interesting here as it has had a few positive comments/catalysts recently. It is a currency related play named FXCM Inc. (FXCM).
Recent Positives/Catalysts for FXCM:
- BGB Securities initiated the shares as a "buy" today with a $11 price target.
- Three insiders have bought just under 90,000 shares in the last five weeks.
- It has established solid technical support at these price levels (See chart).
FXCM Inc. provides online foreign exchange trading and related services to retail and institutional customers worldwide.
4 additional reasons FXCM is a good value play at just over $9 a share:
- The company has robust balance sheet with over $80mm in net cash on its books (25% of current market capitalization). It also pays a dividend of 2.6%.
- The seven analysts that follow the stock have a mean price target of just under $12 a share on the stock. Credit Suisse has an "outperform" rating on the stock.
- Subtracting cash, the stock is priced at less than 8x forward earnings and 7 times operating cash flow.
- Analysts expect FXCM to grow revenues at better than a 20% rate in FY2013. The stock also sports an attractive five year projected PEG (1.12) for a solid dividend payer.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FXCM over the next 72 hours.