Buyouts Bring Small Cap Opportunities
A 21-month run of rock-bottom interest rates have created a
perfect environment for corporate bonds - and as bond yields fall,
bond prices rise and investors and companies have made out like
bandits. This has put so much cash in corporate coffers that cash
(as a percentage of S&P 500 market capitalization and excluding
financials) has soared from just 3% of market value back in 1999 to
more than 12.5% today! This cash is burning a hole in the pockets
of many companies, and they are starting to use it to make bids for
other companies so they can grab market share and expand on the
cheap.
That's great news for small cap stocks with strong fundamentals,
since these are always prime buyout targets. To help you position
yourself for big gains this September, here are five top small cap
stocks going strong:
Small Caps With 1,000% Profit Potential
Small Cap Stock 1 - Valeant Pharmaceuticals
Valeant Pharmaceuticals International
(NYSE:
VRX
) develops drugs used to fight epilepsy, Parkinson's disease,
migraines, acne and even skin cancer. In August, VRX announced
outstanding earnings for the second quarter including profit of
$57.1 million, or $0.69 per share, compared with $0.52 per share in
the second quarter of last year. Additionally, the company reported
sales of $255.6 million compared with sales of $191.7 million in
2009. Those numbers tally out to a +9.5% earnings surprise and a
+6.9% sales surprise!
VRX also recently received preliminary approval by the FDA for a
new anti-seizure medications it is developing in conjunction with
GlaxoSmithKline
(NYSE:
GSK
). That paints a bright picture for the future of Valeant.
Small Caps With 1,000% Profit Potential
Small Cap Stock 2 - Acme Packet (
APKT
)
While the Dow Jones gave up almost -5% in August,
Acme Packet Inc.
(NASDAQ:
APKT
) moved decidedly in the other direction with a +20% gain. The
communication company's CEO recently discusses his company's plans
for the future, including a big push into Voice Over Internet
Protocol (
VOIP
) to replace conventional phone networks. This move towards
software and applications that exist above the IP-level rather than
on physical routers will give Acme an edge over competitors like
Cisco
(NASDAQ:
CSCO
) and
Juniper
(NYSE:
JNPR
).
Small Caps With 1,000% Profit Potential
Small Cap Stock 3 - Radcom (
RDCM
)
Radcom Ltd.
(NASDAQ:
RDCM
) is an Israeli tech powerhouse that posted strong quarterly
earnings last month. The test equipment and software company is
benefiting from strong investor interest in the Israeli tech
sector, one of the largest and fastest-growing in the world. The
company recently announced that a leading Voice over Internet
Protocol (VoIP) operator purchased its Next Generation Networks
Service Assurance solution. The VoIP operator boasts a few million
subscribers and will use Radcom's solution to monitor customer
experiences on its networks.
Small Caps With 1,000% Profit Potential
Small Cap Stock 4 - Netflix (
NFLX
)
Netflix Inc.
(NASDAQ:
NFLX
) announced spectacular earnings results for the second quarter,
and for the third quarter the analyst community is expecting
another blowout performance. The company's sales are predicted to
rise +30% and earnings are forecast to grow +38%. As a sign of
confidence in its stock, Netflix recently announced a $300 million
stock buyback plan that will implement through 2012. This stock has
had a red-hot run in recent months, including gains of +140% year
to date. But the run isn't over yet, and I'm recommending investors
buy Netflix at any price below $140.
Small Caps With 1,000% Profit Potential
Small Cap Stock 5 - WebMD (
WBMD
)
WebMD Health Corp.
(NASDAQ:
WBMD
) has reversed its fortunes of previous quarters with the
announcement early in August that it returned to profitability. The
Internet company, which publishes information on health and
wellness, posted earnings of $7.7 million, or $0.13 per share, much
improved from last year's loss of $11.7 million, or $0.25 per
share, in the equivalent quarter. Analysts had predicted earnings
of $0.12, resulting in an 8.33% earnings surprise! The company is
forecasting sales in excess of $133 million for the third quarter
with continued growth in its advertising business. Shares are up
+33% year to date and I expect the run to continue.
Small Caps With 1,000% Profit Potential