Dream Stocks for Small-Cap Investors

by Dave Mock - July 29, 2009 - 0 comments

Investors are always hunting for the next big stock -- the dream stock
whose price increases several times over when the market finally
discovers it. It's easy to look back and discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.

Motley Fool CAPS
offers a variety of resources to aid Fools in finding tomorrow's
leaders. Our 135,000-member community is full of investors helping each
other beat the market.

We'll enlist CAPS to screen for small-cap companies, then get the
story behind some of its more highly rated stocks. CAPS' nifty screener will help us find stocks with:

A market cap between $100 million and $1 billion.
A three-year revenue growth rate of at least 20%.
A price-to-earnings ratio of less than 25.

Then we'll tap the collective intelligence of our CAPS members to
see whether these companies present real opportunities -- or whether
the numbers fail to tell the true story.

Opinions with the numbers

Below is a sample of stocks our screen returned. You can run this screen yourself -- remember, though, that your results may differ from ours as the market changes.

Company	Revenue Growth Rate, Past 3 Years	Market Cap (in millions)	CAPS Rating (out of 5)
McMoRan Exploration (NYSE: MMR)	82.1%	$529	*****
Excel Maritime Carriers (NYSE: EXM)	76.2%	$651	*****
Energy Conversion Devices (Nasdaq: ENER)	49.3%	$689	****

Data and star rankings from CAPS.

McMoRan Exploration

Although oil and gas
company McMoRan swung to a loss in the second quarter due to lower
production and sales, investors are encouraged by signs that output
could be picking up in coming quarters. The company sees big potential
for gas reserves at its Blueberry Hill project as it recently announced
positive drilling results, and its Flatrock field property will be
coming back online in the third quarter after being on hold for
expansion and maintenance. Like Stone Energy (NYSE: SGY) and ATP Oil & Gas, McMoRan recently completed a huge equity offering,
raising about $170 million to strengthen the balance sheet and provide
the flexibility to pursue opportunities. Overall, 96% of the 395 CAPS
members rating McMoRan see the stock outperforming the broader market.

Excel Maritime Carriers

An increase in iron ore imports from China has provided a boost for dry bulk shippers like Excel Maritime and Navios Maritime
lately as shipping rates have strengthened. Steel production has been
flourishing in the country thanks in part to its $586 billion stimulus
package, and it's been importing at a rapid pace, giving many CAPS
members reason to be bullish on Excel. Also, compared to other shippers like Diana Shipping (NYSE: DSX), which has a high percentage of contracts already covered, Excel has a higher exposure to the spot market, allowing it to benefit from higher rates. In CAPS, 96% of the 1,871 members rating Excel Maritime Carriers expect it to beat the S&P 500.

Energy Conversion Devices

Even with a rough quarter from Energy Conversion Devices still in recent memory, some CAPS members are looking for good things to come
from the thin film solar maker. It's recently extended a supply
agreement with EnergyPeak and announced it will acquire rooftop solar
company Solar Integrated Technologies. The move could help position it
for an expected upturn in the U.S. helped by the Obama administration's
stimulus program, a market other solar companies like SunPower (Nasdaq: SPWRA) and Yingli Green Energy (NYSE: YGE) believe is beginning to heat up. Today, 93% of the 1,165 CAPS members rating Energy Conversion Devices expect it to outperform the market.

Last edited by Salinder Kumar on Wed, 07/29/2009 - 21:05 | Write to author: Dave Mock |