Buy Zones For These Two Small-Caps

It’s been a solid year so far for the major market averages, with the market up 7% year-to-date, a solid rebound after what was a brutal year in 2022.

However, the small-cap universe hasn’t fared nearly as well, with the Russell 2000 Index (IWM) barely in positive territory.

I attribute some of this underperformance to the relatively high weighting of regional banks in the index, which were hit hard following fears of bank runs.

Fortunately, this underperformance has left some small-cap names trading at deep discounts to fair value, and one has been stuck in the mud despite the significant metals price increases in the precious metals sector.

In this update, we’ll look at two small-cap names becoming more reasonably valued, and where I see their ideal buy zones.

Buckle Inc. (BKE)

Buckle Inc. (BKE) is a $1.7 billion company in the Retail-Apparel industry group that was one of the market’s best performers last year as it raced towards its multi-year highs near $50.00 per share.

However, the stock has since pulled back over 30% from its highs, and found itself back near key support at the $30.00 level.

For those unfamiliar, Buckle has over 440 stores in the United States and specializes in jeans, other apparel, footwear, and accessories.

The company released its Q4 2022 results (three months ended January 28th) last month and reported net sales up 5.5% year-over-year to $401.8 million. Meanwhile, quarterly earnings per share were up 3% to $1.78, while full-year EPS came in at $5.13, down just 1% from the year-ago period. Continue reading "Buy Zones For These Two Small-Caps"

2 Small-Caps For Your Watchlist

It’s been a choppy start to the year for the major market averages and while many large-caps have begun new uptrends, several small-cap names remain stuck in the mud, unable to gain much upside traction.

In some examples, this underperformance is justified with many businesses not being worth owning and or having weak balance sheets.

However, there are a few small-cap names with solid business models and decent balance sheets generating free cash flow, and contrarian investors are being presented with an opportunity to invest in these stocks at a very reasonable price, especially given that they have robust growth plans.

In this update, we’ll look at two stocks worthy of adding to one’s watchlist:

MarineMax (HZO)

MarineMax (HZO) is a small-cap name ($600 million market cap) in the Retail-Leisure Products industry group, and is the world’s largest lifestyle recreational retailer of boats and yachts plus yacht concierge and superyacht services.

The company was founded in 1998 in Clearwater, Florida, and has grown through strategic acquisitions to now control a footprint of 125 locations globally, including 57 owned and operated marinas and 78 dealerships.

Some of the company’s recent acquisitions include and Boatzon, Fraser Superyacht Services, MidCoast Marine Group LLC, and IGY Marinas.

Understandably, many investors might not be that interested in owning a business that derives its revenue from recreational boat and yacht sales during a period where consumers are pulling on their spending and in what appears to be a recessionary environment with increasing layoffs. Continue reading "2 Small-Caps For Your Watchlist"

Get Big Results with “Optionality”

Today's Guest Post comes from Chris Mayer of Penny Sleuth. Get Big Results with "Optionality" originally appeared in the Penny Sleuth. In this piece, Mayer explains the concept of "Optionality" as a way to battle the uncertain and fickle market conditions. If you enjoy this post, please click here to learn more about Penny Sleuth and a complimentary report which will share 3 stocks poised to breakout.

“The world has changed. It is a more fragile and less stable place.”

The speaker was Joshua Friedman, the co-chief at Canyon Partners, which manages $20 billion. He was speaking at Grant’s Spring Investment Conference, which I attended in early April.

Friedman used the imagery of the old bell curves. There is the normal bell curve and the “new normal” curve with fatter tails. In plain terms, it means more crazy things will happen. It means outliers will become more common. It means the unexpected will happen more frequently. Wildness lies in wait, as Chesterton had it.

In many ways, markets have always been this way, as the late Benoit Mandelbrot observed. For instance, financial theory – based on the old bell curve – predicts that a market move of 7% or more in a single day will happen once every 300,000 years. Yet the 20th century alone had 48 such days. “Truly, a calamitous era,” Mandelbrot writes, “that insists on flaunting all predictions.” Continue reading "Get Big Results with “Optionality”"