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- No new trades.
Since mentioning the two small-cap stocks as great potential under-the-radar type plays, CytRx’s (CYTR, news, msgs) and TRM’s (TRMM, news, msgs) stock prices have since tripled and doubled in value, respectively, over the past few weeks.
This is a great testament to how some patience in small-cap investing can reap tremendous rewards with a little bit of risk involved. For small-cap investing to be successful, one needs to find out the underlying fundamental drivers going forward and fully understand the business, its value and growth concerns.
There are several great small-cap stock candidates that I feel could work out here. One such small-cap stock that I like a lot here and is currently under the radar is Nitches (NICH, news, msgs), a designer and distributor of fashion-performance apparel. The company just came off a great first quarter with sales up a whopping 141% and earnings up sharply higher to 26 cents per share. Sales are going through the roof due to recent acquisition and organic growth, and its backlog has been strong.
This favors Nitches going forward as a growth- and value-type small-cap play. Sales and earnings will keep growing, and earnings should trump the past year's numbers with ease. In one measure of value investing, Nitches' price-to-sales multiple is at 0.4, while the average stock in the retail sector is about 1. Nitches' stock price zoomed past $9 after it issued its earnings report on Jan. 23. It is currently trading at just above $5.40 as day traders exited the stock. The stock has been very volatile on the days it releases earnings; a good report can push the stock up $2 or $3.
Another stock in same retailing area is Everlast Worldwide (EVST, news, msgs). The stock has seen triple-digit gains since late 2005, to $20.33 on Thursday. The company competes against Nitches, but I think Nitches’ business looks much better than Everlast just now and like the shares better. They're cheap and under the radar. As with any small-cap investing, some risks are warranted here both on the liquidity and company execution.
Meanwhile, I believe the overall stock market is a bit overheated. There is still much uncertainty about our economy and the Fed's stance on interest rates. I would be extra-cautious going forward.
In the next few days, I will look to add a stock to my portfolio as a long play, and I expect to take a short position on a stock I think is overvalued.
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