High Growth Small Caps

by: Walter Gault

The stock market is known for being volatile and unpredictable, but there are signs investors can capitalize on. Wading through the plethora of information and opinions can bog down the individual investor. However, as the communications editor at Sabrient systems, I have access to Sabrient’s proprietary tools and I have been employing them in my stock selections. Sabrient’s Rankings have been rigorously and regularly back-tested for consistency and I will share what I’ve gleaned from the ratings reports.

I chose to focus on small-caps because they’re a specific group of stocks, making it easier to choose some to follow and study their intimate details — a time investment paramount to success. Small-caps have plenty of potential for high growth as well as risk. While not big enough (generally considered to be 150 million-1.5 billion) for institutional investors, small-caps are dominated by the individual investor. In a poor economy, the large cap stocks (Sabrient’s classification: 15 billion +) are impacted more than small-cap stocks because smaller companies may operate in small niches unaffected by economic doldrums. But that is where the inherent risk also lies — the niche may not last or it may become stagnant and not catch on elsewhere.

Sabrient Systems releases weekly market stats on caps and sectors. On the Cap/Style stat, Small-cap growth stocks have been the strongest performers of 2011, especially in the tumultuous last couple months. Pair this ranking with the Sabrient Sector Cast and you have two excellent filters for finding stocks. For the next 30 days, Energy, Basic Industries, Healthcare and Technology carry the highest sector ratings. Entering the strongest sectors and small-cap growth as filters in Sabrient’s MyStockFinder, I gleaned the best looking stocks. Check out the Sabrient Market Stats here.

Last week in my instablog article, “Grow with Three Small-caps,” I presented three tantalizing small-cap growth stocks ready to explode: Mitcham Industries (NASDAQ:MIND), OYO Geospace (OYOG) and Cascade Corporation (NYSE:CASC-OLD). Since June 28th, when they entered my virtual portfolio, they have gained 17.65%, 5.23% and 16.15% respectively.

I have two more small-cap stock selections for you to consider today. After the strong numbers that came out of the Employment Report, this Bull ride could continue for a while longer.

1. FX Energy, Inc. (NASDAQ:FXEN) is an independent oil and gas exploration and production company with principal production, reserves and exploration activities in Poland and oil production and oilfield service activities in the United States. Its stock spiked back in early March at $11.76 and it appears to be turning the corner for an uptrend, trading today at $9.73. Sabrient rates it a Strong Buy due to its exceptional growth and value scores and its strong earnings history. While not a value stock at this point in the game, with a high trailing P/E of 87.66, it has plenty of room for growth with a forward P/E of 38.92. Its projected growth rate for this quarter is 107.8%. And in the past 30 days, its EPS estimates have been revised upward. It’s worth keeping an eye at least for the third quarter.

2. Astronics Corporation (NASDAQ:ATRO) is a supplier of products to the aerospace and defense industries. The Company's products include lighting systems, electrical power generation systems, aircraft safety systems and electrical power distribution systems for the global aerospace industry, as well as test, training and simulation systems primarily for the military. ATRO is rated a Strong Buy by Sabrient and it earned a good growth score and an exceptional momentum score — this is a stock to hold for at least some of the third quarter. The growth estimate for the current quarter is an astronomical 90.90%, backed by a solid projected 5-year growth rate of 15.00%. Its trailing P/E is 22.69 and its forward P/E is 17.00. Looks good to me.

Look for my next article with mid-cap stock picks.

Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.