Best Small Cap Stocks To Watch In 2015

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Includes: AEGN, AREX, BOCH, EGY, FCBC, GEOS, GTE, IRDM, KBAL, LQDT, MFIN, NOG, OFG, OME, PKBK, RCKY, TBNK, TGA, TWI
by: Shailesh Kumar

In terms of valuations, these small cap stocks are cheap. Some of these are cheap for a reason, specifically the companies in the oil and gas sector. My global oil demand/supply model indicates that we will see the oil prices rise again in the 2nd half of this year. At the same time, we have not yet seen large scale well idling and debt defaults for the highly leveraged operators operating in the shale formations, so there is a possibility for the prices to become better yet. With this in mind, I would like to throw up some oil names to keep in the watch list, along with some other small cap names that may be attractive today based on a combination of earnings yield, price to book multiple and historical earnings growth.

Please do not buy or sell any stock without conducting your own due diligence. If any of these stocks become a recommendation, I will post my analysis for the members. You should take this list as a starting point for further research.

Market capitalization range for this screen is $30 million - $1 billion.

Oil & Gas Stocks

COMPANY NAME SYMBOL MARKET CAPITALIZATION INDUSTRY P/E (LAST YEAR ACTUAL) PRICE/BOOK EPS GROWTH (5 YEAR HISTORICAL)
GRAN TIERRA ENERGY INC (NYSEMKT:GTE) $957.9M Independent Oil & Gas 7.9 0.64 22.42%
TRANSGLOBE ENERGY CORP (NASDAQ:TGA) $282.2M Independent Oil & Gas 4.5 0.51 11.33%
VAALCO ENERGY INC (NYSE:EGY) $265.0M Independent Oil & Gas 6.1 0.95 8.16%
NORTHERN OIL AND GAS INC (NYSEMKT:NOG) $340.8M Oil & Gas Drilling and Exploration 5.3 0.51 64.76%
APPROACH RESOURCES INC (NASDAQ:AREX) $222.3M Oil & Gas Drilling and Exploration 12.2 0.3 10.56%
GEOSPACE TECHNOLOGIES CORP (NASDAQ:GEOS) $327.1M Oil & Gas Equipment and Services 9.4 0.99 80.91%

Generally you would think that the EPS Growth data may not be very meaningful given the perception that the oil price shock has made the situation completely different than what it was in the past. Agreed to some extent, but when you are investing in cyclical industries and trying to pick up some good names near the bottom, this data can come in useful to distinguish a well run company from the rest. There is more that goes into making this judgment that requires a good industry knowledge.

Rest of the Market

COMPANY NAME SYMBOL MARKET CAPITALIZATION INDUSTRY P/E (LAST YEAR ACTUAL) PRICE/BOOK EPS GROWTH (5 YEAR HISTORICAL)
MEDALLION FINANCIAL CORP. (TAXI) $252.1M Credit Services 8.7 0.91 6.17%
IRIDIUM COMMUNICATIONS INC (NASDAQ:IRDM) $888.7M Diversified Communication Services 13.9 0.73 77.76%
TITAN INTERNATIONAL INC (NYSE:TWI) $551.1M Farm & Construction Machinery 14 0.86 10.99%
ROCKY BRANDS INC (NASDAQ:RCKY) $103.2M Footwear 13.5 0.77 36.08%
AEGION CORP (NASDAQ:AEGN) $656.8M Heavy Construction 14.7 0.98 8.61%
LIQUIDITY SERVICES INC (NASDAQ:LQDT) $237.3M Liquidity Auctions 8 0.74 35.80%
KIMBALL INTERNATIONAL INC (NASDAQ:KBAL) $358.3M Printed Circuit Boards 11.8 0.81 13.33%
OMEGA PROTEIN CORP (NYSE:OME) $228.1M Processed & Packaged Goods 6.2 0.86 16.35%
PARKE BANCORP INC (NASDAQ:PKBK) $69.8M Regional Banks 7.9 0.86 14.64%
FIRST COMMUNITY BANCSHARES INC (NASDAQ:FCBC) $302.0M Regional Banks 14.6 0.91 49.23%
OFG BANCORP (NYSE:OFG) $722.9M Regional Banks 9.6 0.97 13.96%
BANK OF COMMERCE HOLDINGS (NASDAQ:BOCH) $79.4M Regional Banks 11.4 0.97 15.77%
TERRITORIAL BANCORP INC (NASDAQ:TBNK) $214.0M Regional Banks 14.6 0.92 18.79%

A list of 19 small cap stocks like this should yield 3-5 ideas to keep a closer watch on and possibly 1 or 2 stocks with great investment potential. Let me know in the comments if any of these stocks look good to you. Keep in mind that I look for good values and most of the time this means distressed stock price so it is important to take a deeper look into the business to determine if the reasons justify the valuation.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.