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In
This Edition... |
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Looking for
some fresh ideas to replace the stale ones clogging up your portfolio?
Keep reading... we've got four micro cap picks to mull.
After that ,
we're going to take a look at how the online brokers have been faring -
a timely study, considering the news that's coming out later today, tomorrow,
and next week. However, this analysis is part of a much bigger and meaningful
trend than the upcoming quarterly snapshots.
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Four
Micro Caps to Plant In Your 2010 Investment Garden |
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We've
been so focused on the economy and the broad market of late, we haven't
had as much opportunity as we'd normally like to suggest a few micro cap
stock picks that you - and most of the market - may have missed.
We'll make up for lost time today by presenting four trading ideas
worth considering for your portfolio.
 If
the name Republic Airways Holdings (RJET) rings a bell, it may be
because it was one of our picks from last month's 'Micro
Cap Superlatives: The Best of the Best'. The fact that it's here
again is a testament to the strength of the opportunity.
As we mentioned
last time, Republic Airways barely even blinked during the recession, by
reaming profitable, and looking even more profitable future-wise. The forward-looking
P/E is now 3.46, despite the fact that the stock's 'P' has gained 19% since
our last look.
The reason we
make the RJET reiteration today is largely in part due to Delta's (DAL)
shrinking loss last quarter, and the expectation of profitability for the
current quarter - and that's with the negative impact of volcano-based
flight cancellations. The other reason is March's traffic reports,
which so far have shown decent increases in air travel (business
stravel in particular).
If you're looking
for a way to tap the growing (and verified) improvement in technology spending,
but don't want to use the same over-traded large caps everyone else
is pumping up, then FSI International Inc. (FSII) deserves a look.
The chipmaker's shares have been on a red hot roll over the last several
months, and while overbought, they may well be worth it.
Why's that?
Because
FSI International swung to a profit last quarter... a big one, of $610,000
(versus revenues of $18 million). That margin of 3.2% isn't earth shattering,
but the improvement trend is quite strong. The estimated EPS of
$0.20 for this fiscal year (ending in August), and next year's estimate
of $0.46 per share, is plausible in light of last quarter's progress.
 Novatel
Wireless Inc. (NVTL) certainly isn't the cheapest stock in the stable,
but sometimes a premium has to be paid for growth and quality names. And,
Novatel can arguably be put into that category.
Our attraction
to the stock, however, is rooted in the chart than in the underlying
fundamentals. In simplest terms, NVTL has almost 'made the turn'. By that,
we just mean this micro cap has slowly been bleeding off the selling pressure,
and has more recently tested the waters of higher highs again. If the 50
day moving average line at $6.96 can be crossed - and if the move holds
-
that should pretty much seal the technical deal, and be a trend redirection
for Novatel Wireless Inc.
And finally,
while bigger-brothers like Nucor Corp. (NUE) and AK Steel (AKS) have been
a little less than thrilling of late, Metalico Inc. (MEA) shares
have managed to keep on chugging over the last several months on the heels
of real results.
Though the company
fell short of estimates last quarter, it topped them in the three prior
quarters... by quite a bit. Given the overall earnings trend, the
forward-looking P/E of 15.5 for 2010 and 11.0 for 2011 are both plausible.
If the economy rebounds even more firmly than expected, Metalico
could hold significant upside surprise potential.
We view it as
an ideal long-term recovery play. Yet, the company's still mostly uncovered
and undiscovered.
These micro
caps certainly are no outright guarantee of success, nor are they
the only ownership-worthy names out there from the micro cap universe
(consider that the disclaimer). Each is definitely worth consideration
as part of a diversified portfolio though, being great companies in the
right industry as the right time.
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Are
Online Brokers Back in Business? |
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Is online
stock trading activity brisk enough to bring the big dot-com brokerages
back into their full glory? Remember, these guys can make money in
good and bad markets.... whether investors are selling for gains, or selling
to limit losses. They simply need people to trade.
While most of
the online brokerage firms have released last quarter's numbers - or
will release them within a matter of days - there's actually a better
way to get a feel for trading volume than waiting for quarterly results
(which is pretty much too late to do anything about).
 The
numbers you want to watch for are called DARTs, or 'daily average revenue
trades'. Most of the major brokerage houses publish then monthly, and
while it's not the only source of revenue for brokers, it's a big one -
not to mention a barometer for other revenue-bearing activity.
Just to illustrate
what we mean (as well as show you the current trading activity trend),
let's compare monthly DARTs for the first three months of 2010 to the first
three months of 2009. Not all the trading firms publish them, but enough
do to get a good feel for the trend.
While January
of this year saw solid increases in trading activity, February - and
March's numbers so far - have been lackluster. Some of that is seasonal,
and some of that is an unfair comparison to the bottoming process we were
going through in February and March of last year. Some of it, however (and
'how much?' is the big question), is just demand and investor interest
drying up. Either way, the current picture isn't an encouraging one.
It will be interesting
to see if the trend changes any once OptionsXpress, E*Trade, and TradeStation
chime in with March's results. E*Trade's numbers come out later today,
TradeStation's will be out tomorrow, and OptionsXpress' will be released
next Tuesday. We'll post an update when the total tally is in.
In the meantime,
you now have a monthly tool that will help you gauge brokerage firms' revenue,
rather than being forced to wait for quarterly numbers. And more important
for now, we can see things are not all that compelling.
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
