I agree with your premise. My favorite stocks for years have been micro or small cap stocks, where they are unknown and/or just beginning to show solid growth in their earnings, and thus offer tremendous potential once their story is "discovered." Do you have any ideas which fit these criteria at the current time? I haven't found too many of late, and most that I have are bulletin board stocks, which a lot of people have no interest in (to me a bulletin board company which is fully reporting is just as valid an investment as a listed company, but I know many people don't feel that way). In this vein, I would be interested in some of your favorite stocks if you would be willing to share them.
Though it isn't wildly undervalued or "mispriced," one of my favorites is UHCO, which has already made a nice move in the past year, but which still seems well undervalued trading at 11 times next year's earnings, with a 20% growth rate and nearly 20% ROE. They also have over 4 dollars in tangible book value, and book value has grown at over 15% a year for the past five years.
As you noted, I look at this company and figure in a few years they could be earning 2 bucks a share, with 10 dollars or more in book value, and if they gain a following and achieve a P/E more in line with their growth, the stock could be 40 to 50 bucks. |
