Category Archives: roiak

10 Microcap Value Stocks

On a monthly basis I conduct a close replication of AAII’s (American Association of Individual Investors) “Shadow Stock” screen. The goal is to find small, undervalued stocks with high price momentum over the past 52 weeks.  It is a highly speculative, risky strategy that can potentially undercover a hidden gem or two.

The screen and date below is courtesy of Stockscreen123. I use the following screen criteria to identify high momentum value stocks, which closely replicate the AAII Shadow Stock screen:





  • No over-the-counter stocks
  • No financial stocks
  • Market cap > $20 Million and < $200 million
  • Previous EBITDA quarter and trailing twelve months are positive
  • Share price > $1
  • Price/book < .80
  • Price/sales < 1.2
  • Top 10 stocks are selected based on highest 52 week returns
  • Minimum average daily volume > 5k shares
  • Now you can follow me on Stocktwits and Twitter!

    The results for this month are at the bottom of the article and last month’s list is here.  The screen for last month returned -16.67%, versus -15.49%.  Given that many of the stocks on the list are relatively illiquid, real results will differ.


    In June I discussed in-depth the difficulty in valuing some Chinese stocks.   The Chinese companies under the most scrutiny are those which began trading in the US via reverse mergers, which is the practice of a private company acquiring a public company (many times penny stocks which have little or no value) in order to bypass the lengthy and expensive process of going public.  Allegations (and in some cases proof) of accounting fraud have plagued the Chinese small-cap sector, especially those companies which began trading via reverse mergers.  The non-Chinese firms still warrant additional due diligence, as all of these stocks have low market caps and often have very low volume.


    Cobra Electronics (COBR) was featured in-depth last month, when I noted support was at $3-$3.25 and resistance at $4-$4.25.  The stock hit resistance at the end of July, shortly after earnings.  The stock has sold off hard since then with the overall equity market.  The market reacted well to the stock’s earnings which were announced July 29th.   The company reported $.08/share net income for the quarter. Sales for the quarter increased from $25.7 million to $28.9 million and gross margins increased from 26.5% to 28.4%.   The company offered no specific guidance but stated that they “anticipate higher profitability in 2011”.


    COBR expects profitability in 2011 and trades at a price/book of .63 and price/sales of .18.   My concern with such a small company (market cap of $21 million), is that there is a lack of liquidity and the stock has a high beta at a time when the overall market has shown signs of weakness.  Thus, investors could be left holding the bag if the market continues to struggle.


    Daily chart courtesy of Finviz



    Rocky Brands (RCKY) is another name that has traded down significantly along with overall equity market after it announced earnings July 26th.  The company increased earnings despite lower sales due to a decrease in sales under military contracts.  The stock currently trades at a forward P/E of 6.26, a price/book of .74, and has a strong balance sheet with a current ratio of 6.63.  It has increased earnings for 8 consecutive quarters on a year over year basis. It could be a name to watch as well if the market continues to drag it further (daily chart):





    The rest of the names on the list:

    Ticker Name Market Update Rank MktCap Pr2SalesTTM Pr2BookQ
    GFN General Finance Corporation Here 99.31 71.32 0.41 0.65
    FFHL Fuwei Films (Holdings) Co., Ltd Here 98.05 32.21 0.35 0.36
    ROIAK Radio One, Inc. Here 97.52 61.13 0.2 0.65
    SURW SureWest Communications Here 96.21 165.14 0.68 0.61
    COBR Cobra Electronics Corporation Here 94.7 21.45 0.19 0.64
    UWN Nevada Gold & Casinos Here 94.48 21.88 0.46 0.72
    TIII Tii Network Technologies, Inc. Here 92.66 30.54 0.49 0.73
    RCKY Rocky Brands, Inc. Here 89.3 82.24 0.33 0.76
    SKH Skilled Healthcare Group, Inc. Here 88.58 178.31 0.21 0.59
    TGX Theragenics Corporation Here 85.65 54.36 0.66 0.66

    Disclaimer: No current positions in stocks mentioned. Please note that Scott’s Investments is not a financial adviser. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of Scott’s Investments.

    10 Microcap Value Stocks

    On a monthly basis I conduct a close replication of AAII’s (American Association of Individual Investors) Shadow Stock screen. The goal is to find small, undervalued stocks with high price momentum over the past 52 weeks.  It is a highly speculative, risky strategy that can potentially undercover a hidden gem or two.

    The screen and date below is courtesy of Stockscreen123. I use the following screen criteria to identify high momentum value stocks:

    • No over-the-counter stocks
    • No financial stocks
    • Market cap > $20 Million and < $200 million
    • Previous EBITDA quarter and trailing twelve months are positive
    • Share price > $1
    • Price/book < .80
    • Price/sales < 1.2
    • Top 10 stocks are selected based on highest 52 week returns
    • Minimum average daily volume > 5k shares



    The results for this month are at the bottom of the article and last month’s list is here.  The screen for last month returned 6.4%, bolstered by FFHL’s 55% return. Last month’s piece I discussed in-depth the difficulty in valuing some Chinese stocks.   The Chinese companies under the most scrutiny are those which began trading in the US via reverse mergers, which is the practice of a private company acquiring a public company (many times penny stocks which have little or no value) in order to bypass the lengthy and expensive process of going public.  Allegations (and in some cases proof) of accounting fraud have plagued the Chinese small-cap sector, especially those companies which began trading via reverse mergers.

    With that caveat in mind, there are two Chinese firms on this month’s list, FFHL and CNTF.  The non-Chinese firms still warrant additional due diligence, as all of these stocks have low market caps and often have very low volume.  

    Cobra Electronics (COBR) is a $23 million company engaged in the design and marketing of two-way mobile communication products and mobile navigation products.  It trades at a price/sales of .21 and price/book of .68 and has no long-term debt. It has razor thin profit margins (net margins of 1.89%), so there is little room for error.  It has increased earnings the trailing twelve months of 121% versus the previous trailing twelve months and 40% this quarter versus the previous year’s quarter.  However, the company’s five ear sales and earnings growth rates are negative, and as a result the stock has suffered since 2006 before rebounding in 2009.

    The stock’s longer term price action shows support at $3-$3.25 and resistance at $4-$4.25.  It is currently consolidating between those two points so from a technical perspective it could be ready for a move:

    Now you can follow me on Stocktwits and Twitter!

    No Ticker Name Last Rank MktCap Pr2SalesTTM Pr2BookQ






    1
    FFHL
    Fuwei Films (Holdings) Co., L 3.53 98.55 46.15 0.51 0.52



    2
    ROIAK
    Radio One, Inc. 1.62 88.44 76.36 0.27 0.67



    3
    UWN
    Nevada Gold & Casinos 1.59 87.80 20.35 0.42 0.67

    4
    WOLF
    Great Wolf Resorts, Inc. 3.47 86.18 112.68 0.39 0.70



    5
    COBR
    Cobra Electronics Corporation 3.60 82.00 23.54 0.21 0.68

    6
    PARL
    Parlux Fragrances, Inc. 3.06 77.77 63.52 0.52 0.62



    7
    AWRCF
    Asia Pacific Wire & Cable 4.73 73.65 65.42 0.13 0.42



    8
    WLFC
    Willis Lease Finance Corporat 13.30 71.65 158.45 1.03 0.60





    9
    CHGS
    China GengSheng Minerals, Inc 1.74 68.32 46.62 0.70 0.78





    10
    TGX
    Theragenics Corporation 1.70 67.57 57.61 0.70 0.71



    Checking In On Tiny Titan Stocks

    Earlier this year I wrote a couple of articles and backtests (here and here) on AAII’s (American Association of Individual Investors) Tiny Titan screen.  To summarize, the screen performed very well earlier this decade but has struggled significantly since 2007.  The screen is simple, using StockScreen123 I screened for companies with a market cap between $25 million and $250 million, a price to sales of less than 1, excluded over the counter stocks, and finally ranked the top 25 based on the greatest relative strength over the past 52 weeks.  This screen could also be replicated using any number of free online screeners.

    In my February 20th article, I suggested that adding a requirement that the Russell 2000 Index be trading above its 200 day simple moving average could potentially reduce the drawdowns in the screen, which has plagued the screen since 2007. Currently, the Russell 2000 Index is just above its 200 day moving average.  The up-to-date screen results are below:

    No positions

    Ticker Name Last Trend Analysis MktCap Sector
    MERC Mercer International Inc. 5.05 Here 184.58 Basic Materials
    GTN Gray Television, Inc. 2.93 Here 167.4 Services
    EMMS Emmis Communications Corporat 2.06 Here 77.96 Services
    LUNA Luna Innovations Incorporated 2.05 Here 26.43 Technology
    SBSA Spanish Broadcasting System I 1.17 Here 76.05 Services
    ESCA Escalade, Inc. 4.95 Here 62.82 Consumer Cyclical
    LBY Libbey Inc. 12.68 Here 204.94 Consumer Cyclical
    XJT ExpressJet Holdings, Inc. 6.59 Here 111.81 Transportation
    LGL The LGL Group, Inc. 12.75 Here 28.46 Technology
    SMTX SMTC Corporation (USA) 3.48 Here 52.34 Technology
    DRJ Dreams, Inc. 1.57 Here 59.25 Services
    IDSA Industrial Services of Americ 19.76 Here 127.55 Services
    MPG MPG Office Trust, Inc. 3.32 Here 159.4 Services
    NCT Newcastle Investment Corp. 2.73 Here 169.27 Services
    PERF Perfumania Holdings, Inc. 9.57 Here 85.77 Services
    ZOOM Zoom Technologies, Inc. 5.63 Here 50.56 Technology
    SGA Saga Communications, Inc. 22.4 Here 95.4 Services
    LCUT Lifetime Brands, Inc. 15.2 Here 182.65 Consumer/Non-Cyclical
    MSN Emerson Radio Corp. 2.5 Here 67.82 Consumer Cyclical
    HPJ Hong Kong Highpower Technolog 4.11 Here 55.82 Consumer Cyclical
    NXST Nexstar Broadcasting Group, I 5.5 Here 156.37 Services
    WXCO WHX Corporation 4.89 Here 59.55 Basic Materials
    ROIAK Radio One, Inc. 1.07 Here 58.31 Services
    THMD Thermadyne Holdings Corp. 13.75 Here 186.31 Capital Goods
    UCTT Ultra Clean Holdings, Inc. 10.46 Here 226.34 Technology


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    Tiny Titan Stock Portfolio for March

    One of AAII (American Association of Individual Investors) more popular–and profitable–screens is the ‘O’Shaughnessy Tiny Titans’. Since 1998 the screen has produced cumulative results of over 2000%. However, since 2007 the screen has struggled significantly in down markets. 


    The screen looks for companies with a market cap between $25 million and $250 million, a price to sales of less than 1, excludes over the counter stocks, and finally, ranks the top 25 based on the greatest relative strength over the past 52 weeks. This creates a list of highly volatile and risky stocks. However, there may be some names of interest worthy of further research. In addition, one potential strategy would be to pair the portfolio with a hedge by simultaneously shorting the Russell 2000 via RWM with a portion of your portfolio. Or, an investor could only participate in the strategy when an index such as the Russell 2000 was above a long term moving average. My suggestion for using a moving average system was inspried in part by Mebane Faber’s The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets and also by Tom Lydon, author of The ETF Trend Following Playbook: Profiting from Trends in Bull or Bear Markets with Exchange Traded Funds.


    I ran the AAII Tiny Titans screen using stockscreen123 and came up with the following 25 names. If there is interest among readers, it could be a portfolio I track for free on my blog along with several others already available for free. I also looked at the 3 and 5 year performance when the portfolio was rebalanced every 4 weeks. The past 3 years the screen returns were approximately -30% excluding slippage and commissions. The past 5 years the cumulative return was approximately 56% excluding slippage and commission. Thus, this screen struggled mightily in negative markets.
    Below is the current list ranked on their 52 week return as of 3/17/10. The list will differ from the AAII list because that list was updated 1/31/10. This is not a screen I would blindly invest in without significant further investigation of each name, an acute awareness of the liquidity of each stock, and also without using stop losses and/or a hedge. If an investor wanted to run this screen–or variations of it– for free he or she could do so using any number of free stock screens such as the one available at Finviz. or the aforementioned stockscreen123.





    Ticker Name Last Free Trend Analysis MktCap
    SPCHA Sport Chalet, Inc. 2.65 Here 38.13
    SALM Salem Communications Corp 4.92 Here 118.61
    CVGI Commercial Vehicle Group, Inc 6.68 Here 161.41
    LBY Libbey Inc. 12.9 Here 199.6
    MGPI MGP Ingredients, Inc. 7.78 Here 128.06
    BELM Bell Microproducts Inc. 5.2 Here 168.4
    ZOOM Zoom Technologies, Inc. 6.86 Here 51.08
    LCUT Lifetime Brands, Inc. 12 Here 140.07
    WNC Wabash National Corporation 7.65 Here 210.3
    ATSG Air Transport Services Group 2.54 Here 163.73
    SBSA Spanish Broadcasting System I 0.98 Here 61.7
    LEE Lee Enterprises, Incorporated 3.47 Here 160.2
    BONT The Bon-Ton Stores, Inc. 12.54 Here 235.14
    BIOF BioFuel Energy Corp. 2.83 Here 95.29
    VVTV ValueVision Media, Inc. 3.59 Here 117.38
    AHC A. H. Belo Corporation 7.93 Here 161.48
    CMRG Casual Male Retail Group, Inc 3.57 Here 184.42
    MERC Mercer International Inc. 5.73 Here 213.19
    ROIAK Radio One, Inc. 3.3 Here 181.69
    LNET LodgeNet Interactive Corp. 6.46 Here 141.99
    NXST Nexstar Broadcasting Group, I 4.8 Here 141.87
    SGA Saga Communications, Inc. 26 Here 102.97
    PATK Patrick Industries, Inc. 2.99 Here 26.85
    JRN Journal Communications, Inc. 4.01 Here 218.53
    NAVI NaviSite, Inc. 2.99 Here 108.96

    No positions in stocks mentioned

    Tiny Titans Portfolio with a 200 Day Benchmark

    On Friday I detailed AAII’s Tiny Titans stock screen.  Using the beta stockscreen123 I backtested the Tiny Titans portfolio only when the Russell 2000 was above its 200 day moving average.  The goal is to reduce potential drawdowns by only investing in the strategy when the overall market is in a long term uptrend. By adding this simple rule, the Tiny Titans screen avoided some of the significant drawdowns in 2007 and 2008.  Other potential trading strategies may work better on the individual companies in the Tiny Titans list, such as the one I detailed in-depth here which involves placing stop losses on individual positions.

    The 8 year performance of the strategy results in a $100 investment turning into $349.70 versus $137.30 in the Russell 2000 (dividends excluded) when rebalanced every 4 weeks and excluding slippage/commissions:

    A 5 year investment turned to $138.30 versus $100.20 in RUT.

    A 3 year investment turned into $84.10 versus $77.30 in RUT.  It suffered a large drawdown in August/September 2008 and October 2007 when the Russell 2000 was briefly above the 200 day moving average but suffered large negative months.

    The current list of stocks matching the criteria are:

    Ticker Name Last Free Trend Analysis MktCap
    VVTV ValueVision Media, Inc. 3.93 Here 127.08
    ROIAK Radio One, Inc. 3.3 Here 180.6
    LEE Lee Enterprises, Incorporated 3.8 Here 170.51
    ATSG Air Transport Services Group 2.42 Here 153.57
    LNET LodgeNet Interactive Corp. 5.99 Here 135
    NAVI NaviSite, Inc. 2.89 Here 107.81
    CMRG Casual Male Retail Group, Inc 3.17 Here 149.51
    LBY Libbey Inc. 10.32 Here 156.41
    MGPI MGP Ingredients, Inc. 7.6 Here 126.73
    BIOF BioFuel Energy Corp. 2.8 Here 95.29
    SPCHA Sport Chalet, Inc. 2.02 Here 28.53
    SALM Salem Communications Corp 4.92 Here 116.48
    IHR Interstate Hotels & Resorts, 2.25 Here 72.35
    PXLW Pixelworks, Inc. 3.4 Here 45.56
    BONT The Bon-Ton Stores, Inc. 8.44 Here 156.63
    CVGI Commercial Vehicle Group, Inc 4.99 Here 113.51
    BELM Bell Microproducts Inc. 4.57 Here 145.76
    KV.A K-V Pharmaceutical Company 3.08 Here 153.84
    IEC IEC Electronics Corp. 6.13 Here 54.8
    TXIC Tongxin International Ltd 8.15 Here 100.32
    SBSA Spanish Broadcasting System I 0.74 Here 48.06
    KTCC Key Tronic Corporation 5.62 Here 56.71
    NXST Nexstar Broadcasting Group, I 4.39 Here 124.81
    WILC G. Willi-Food International L 6.96 Here 71.46
    ARTX Arotech Corporation 1.89 Here 27.2

    Tiny Titan Stocks

    AAII (American Association of Individual Investors) released their January 31st screen results this week.  One of their more popular–and profitable–screens is the ‘O’Shaughnessy Tiny Titans’.  Since 1998 the screen has produced cumulative results of over 2000%.  However, since 2007 the screen has struggled significantly along with the overall market.

    The screen looks for companies with a market cap between $25 million and $250 million, a price to sales of less than 1, excludes over the counter stocks, and finally ranks the top 25 based on the greatest relative strength over the past 52 weeks.  This creates a list of highly volatile and risky stocks.  However, there may be some names of interest worthy of further research.  In addition, one potential strategy would be to pair the portfolio with a hedge by simultaneously shorting the Russell 2000 via RWM with a portion of your portfolio.  Or, an investor could only participate in the strategy when an index such as the Russell 2000 was above a long term moving average.  My suggestion for using a moving average system was inspried in part by Mebane Faber’s The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets and also by Tom Lydon, author of The ETF Trend Following Playbook: Profiting from Trends in Bull or Bear Markets with Exchange Traded Funds.

    I ran the AAII Tiny Titans screen using stockscreen123 and came up with the following 25 names. If there is interest among readers, it could be a portfolio I track for free on my blog along with several others already available for free. I also looked at the 3 and 5 year performance when the portfolio was rebalanced every 4 weeks.  The past 3 years the screen returns were approximately -33%  excluding slippage and commissions.  The past 5 years the cumulative return was approximately 33%.  Thus, this screen struggled mightily in negative markets.  Below is the current list ranked on their 52 week return as of 2/18/10.  The list will differ from the AAII list because that list was updated 1/31/10. Personally, this is not a screen I would blindly invest in without further investigation of each  name and also without using stop losses and a hedge. If an investor wanted to run this screen for free he or she could do so using any number of free stock screens such as the one available at Finviz.

    No position in the stocks mentioned

    Ticker Name Last Free Trend Analysis MktCap
    VVTV ValueVision Media, Inc. 3.93 Here 127.08
    ROIAK Radio One, Inc. 3.3 Here 180.6
    LEE Lee Enterprises, Incorporated 3.8 Here 170.51
    ATSG Air Transport Services Group 2.42 Here 153.57
    LNET LodgeNet Interactive Corp. 5.99 Here 135
    NAVI NaviSite, Inc. 2.89 Here 107.81
    CMRG Casual Male Retail Group, Inc 3.17 Here 149.51
    LBY Libbey Inc. 10.32 Here 156.41
    MGPI MGP Ingredients, Inc. 7.6 Here 126.73
    BIOF BioFuel Energy Corp. 2.8 Here 95.29
    SPCHA Sport Chalet, Inc. 2.02 Here 28.53
    SALM Salem Communications Corp 4.92 Here 116.48
    IHR Interstate Hotels & Resorts, 2.25 Here 72.35
    PXLW Pixelworks, Inc. 3.4 Here 45.56
    BONT The Bon-Ton Stores, Inc. 8.44 Here 156.63
    CVGI Commercial Vehicle Group, Inc 4.99 Here 113.51
    BELM Bell Microproducts Inc. 4.57 Here 145.76
    KV.A K-V Pharmaceutical Company 3.08 Here 153.84
    IEC IEC Electronics Corp. 6.13 Here 54.8
    TXIC Tongxin International Ltd 8.15 Here 100.32
    SBSA Spanish Broadcasting System I 0.74 Here 48.06
    KTCC Key Tronic Corporation 5.62 Here 56.71
    NXST Nexstar Broadcasting Group, I 4.39 Here 124.81
    WILC G. Willi-Food International L 6.96 Here 71.46
    ARTX Arotech Corporation 1.89 Here 27.2