Small Cap Stocks To Buy On The Dip
Last month, I ran a stock screen to see which companies seemed attractive to insiders in the month of September, with the market trading near its all-time highs.
One stock from that screen has already made it to our portfolio — after doing further research, I added it in the latest issue of Game-Changing Stocks.
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But as you know, in barely a month the market changed. October brought us nearly a 7% decline in the S&P 500, a 5% decline in the Dow Industrials, and a better than 9% decline in the Nasdaq Composite Index.
#-ad_banner-#Last month’s screen showed us which stocks were considered bargains by insiders in a strong, climbing market. The same or similar methods should work with a weaker market, too. Therefore, I recently set out to determine which stocks are considered bargains by insiders as they buy relatively large amounts in the context of a much weaker market.
This screen, which I first shared with Game-Changing Stocks subscribers, is relatively simple… I sorted the small-stock Russell 2000 index in order of relative size of insider purchases (measured by the total volume of purchases relative to company size) — selecting all those companies with sizeable insider buys over the past month.
Despite the screen being so straightforward, its results could be very informative: insiders — whether they are the company’s management or board members — know more about their company than almost any analyst, and certainly can have a much more intimate understanding of whether that company is on the right track.
Below, I present the top five companies from that screen.
Aclaris (Nasdaq: ACRS), a small-cap biotech, tops this month’s list.
Public for only three years, this young company has its sights set on helping dermatological — skin and hair — disorders. In the past 12 months, though, this stock lost nearly 60% of its value — and insiders seem to be noticing value in the shares at current levels. I’ll be watching this company closely.
Carriage Services (NYSE: CSV), a funeral home operator, also lost a significant chunk — about 30% — of its value over the past year. And after the shares dropped nearly 20% in the past couple of weeks, the company’s CEO, Melvin C. Payne, started buying shares in significant amounts and increasing his direct ownership in the company as a result.
At first blush, this company does not have much in the way of game-changing potential. But such is the nature of a stock screen — it does not differentiate among companies; it just selects a set of companies according to a set of criteria. And CSV looks interesting from this point of view.
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California-based RBB Bancorp. (NYSE: RBB) is already nearly 20% insider-owned, and in the past month insiders have been buying with both hands, despite — or thanks to — the shares’ 25% three-month decline. I’ll be keeping an eye on this small bank as well.
The remaining two stocks might look familiar to you, as they were also highlighted in my previous screen: the aforementioned E.W. Scripps and Hyster-Yale (NYSE: HY), an international lift-truck maker. For both companies, insiders continued to buy for a second consecutive month (without selling shares). These companies clearly look interesting enough or cheap enough to insiders.
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Keep in mind that the investing ideas I present here are intended to provide a starting point for further research, not a final recommendation. As with any quantitative tool, my Game-Changing Stocks Stock Screen should not be used in isolation. Please make sure to evaluate fundamental characteristics of every potential investment opportunity to determine if it is a right fit for your portfolio.
My Game-Changing Stocks subscribers know all too well what it takes to find a true game-changer. Even after a screen like this, there is still a lot of research to be done before my staff and I feel confident in making a recommendation. That’s a big reason why we’re currently sitting on gains of 60.8%, 85.9%, 105%, and 166.2% in our portfolio. If you’d like to see our latest research, and get access to our entire list of current picks, go here right now.