A couple of small cap stocks worthy of attention

Today a client gave me a call and wanted to know why the mutual fund she just purchased  2 weeks ago is down about 2.5%.  I explained to her that the fund had a front end load of 3% and she should at least give the thing a chance to pay a dividend before she condemns it.  It seems that the 3 minute holding period, I mentioned the other day, has invaded the brain of the average investor.  

I posed the question..."Can an individual make money with the perspective of a long term hold?"


My answer is YES!  Here are a  couple of smaller cap stocks that I think are worthy of attention: 


1.  Buckeye Technologies  (BKI) 
BKI has a market capitalization of about 1.0 billion and trades on the NYSE.  The yearly price range of the stock has been between $9.32 and $28.50, it pays a very nominal dividend of .20c per share per year and has a forward PE of about 9.5.  Fundamentally the stock looks pretty strong as shown by year over year revenue growth of almost 14% and a net profit margin of 8%.  Debt makes up only about 28% of capitalization so interest funding is very solid.  Technically, the up momentum has slowed just a smidge these past few days (probably because the company is about to report first quarter earnings which are scheduled to show up on the 28th of April).  In the past 6 quarters BKI has beaten the street estimates 4 times and no doubt these positive earnings surprises have carried the stock up.  If BKI can hold, and move up a little, it will give you a great opportunity to sell calls against your position which will help on the total return front.  After the earnings announcement, I'll address the call strategy. 


2.  Rockwood Holdings (ROC) 
ROC is about a 3.5 billion dollar company that is also listed on the NYSE.  At $48.50 per share it is pretty close to its yearly high of just under $52.00.  The earnings momentum on ROC has been great as the company has beaten street estimates 10 of the last 12 quarters.  ROC is a decent size player in the lithium market (can you say batteries?) as well as other speciality chemicals.  Like BKI, ROC has a decent beta and with just a bit of an uptick will provide a great chance to sell calls against your position.


Disclaimer: The opinions provided herein are intended to inform. They come with no warranty of any kind. If you should choose to interpret this information as investment advice, you do so at your own risk.