Investors focused on larger companies saw their ups and downs in
2011. Rather than focus on the usual suspects, perhaps they should
have been focused on antimony. It's an obscure -- and toxic --
element that has some appealing industrial applications such as
flame retardants and in solder and ball bearings. Antimony helped
U.S. Antimony Corp. (Nasdaq:
boost prospects, and the stock more than quadrupled in value in
The question for investors: Can this hot stock along with its other
high-flying peers post new highs in 2012? Let's take a closer look
at a group of micro-cap stocks that rose by at least 100% last
U.S. Antimony's gains present a typical challenge facing micro-cap
investors. The company is so small, it's hard to grasp where the
business may be headed and what it's worth. We know sales are
rising at a 50% clip and may have exceeded $13 million in 2011. We
also know a recent capital raise should help mining output climb
even higher, perhaps toward $20 million this year (an educated
guess, to be sure).
Still, with close to 60 million
, the company's current
is likely around eight times that possible 2012 sales rate. This is
the kind of stock you'd need to spend a good bit of time
Other micro-caps don't make you work quite so hard just to glean an
initial value assessment. Take consumer electronics retailers
as an example. Last June, I noted the stock traded far below
and was due for a rebound.
have doubled since then, and the stock now trades just above book
value. Surely, shares aren't the bargain they were back then.
In a similar vein, investors should forget about further gains for
In September 2011, I suggested shares could keep running on
expectations that business would improve as more post offices were
closed due to budget cutbacks. The stock has risen more than 50%
since then and now looks
. This company is unlikely to ever boost sales more than 15%
annually. It is largely mature and the number of post offices
slated for closure comprises only a small percentage of the total
base. Profits likely hit about $1.30 a share in 2011 and analysts
don't see much profit growth in 2012. As such, the forward
price-to-earnings (P/E) ratio of around 23 seems too rich.
More gains for eGain?
One of the major technology trends of the past decade has been the
outsourcing ofcall centers. Even as they seek to save money by
hiringcall center staff in countries such as India and the
Philippines, companies still must be sure they are providing a high
level of customer service. To make sure the
center operators have access to all of the important information
they need, they rely on specialized software that marries the world
of customer service and corporate data. That's where by
eGain Communications (Nasdaq:
software comes in.
It took a while for eGain to really gain traction: Annual sales
were stuck at around $30 million in fiscal (June) 2008, 2009 and
again in fiscal 2010. Yet the company saw sales spike 44% in fiscal
2011 to almost $50 million as new customers such as Vodafone, AMR
and Alliant Telecom joined the client roster. What had been a $1
stock back in the fall of 2010 reached almost $10 last fall.
These days, the stock is back down below $6, which translates into
a still-considerable gain for 2011. Why the pullback? Because eGain
delivered such robust growth back in calendar 2010, year-over-year
comparisons in recent quarters haven't looked quite as robust. For
example, sales in the fiscal first quarter of 2012 (ended last
September) fell 20% from a year earlier to $10.3 million.
Investors should take a fresh look at this business when eGain
reports fiscal second-quarter results on Feb. 8. Right now, the
stock appears somewhat inexpensive at around 2.5 times the
annualized sales run rate. Software vendors can garner a much
higher multiple -- when growth is in evidence.
$100 oil does the trick
Steadily rising prices for crude oil helped push shares of
Saratoga Resources (Nasdaq:
up nearly 200%, and the upward move may continue. This
company drills for oil, primarily in "transitional zones" that lie
between major shale formations in Louisiana. Its main focus: The
Grand Bay field, roughly 70 miles southeast of New Orleans.
In this industry, success begets success. Higher oil prices boost
, which allows for increased investments in yet-to-be-tapped oil
wells. Saratoga likely generated $77 million in revenue last year,
and this figure is expected to exceed $100 million in 2012, thanks
to new wells that are coming into production.
Shares currently stand about 15% below the company's stated
net asset value
) of about $7.30, but this figure may prove to be conservative.
Analysts at C.K. Cooper figure NAV would be assessed at $8.04,
assuming $100 oil and $3.50 per MCF (metric cubic foot) in gas
prices. If these figures moved up to $110 and $4, respectively,
which is the long-term target that many energy analysts use, then
NAV would be about $10, or roughly 50% higher than the current
stock price. That's actually the target price that C.K. Cooper
uses, as the firm assumes current stated NAV and then also assumes
that 50% of Saratoga's unproven reserves ultimately get exploited.
Risks to Consider:
After a strong run in 2011, these stellar performers have a
tough act to follow. Insiders may look to book profits and unload
shares, now that they've made plenty of money in these fast-rising
Action to Take -->
Despite big gains, many of these stocks remain off the radar for
most investors. You have a chance to dig deep into these names
before the rest of the herd shows up.
My favorite approach for these big gainers is to watch for
pullbacks. That's a natural event as long-term shareholders secure
profits, and it isn't necessarily a sign of trouble. Stocks like
eGain, noted above, are well above their recent peaks and may be
set to make another run at the
. Saratoga, on the other hand, might make for a good 50% gain if
you research the stock further and agree with the analyst
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-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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