It’s been an impressive year for small-cap stocks.
Since the year began, the Russell 2000 has gained 7%, as the S&P 500 tacked on just 5%.
In fact, small-cap growth funds gained an average of 6.6% since the year began, as larger-cap funds averaged 2.85%, according to Morningstar.
Yet, some investors continue to ignore small-cap stocks for the perceived safety of large caps.
In doing so, they’re also overlooking extreme value in stocks with sound fundamental growth.
One of those stocks was Bovie Medial (BVX) – a producer of medical devices, electrosurgical products and technologies, such as the J-Plasma surgical tool that allows a surgeon to cut, coagulate and vaporize delicate body tissues at a cooler temperature than that of a traditional CO2 laser.
It also just received 510(k) clearance from the FDA for its new bipolar ablator, which can cut, vaporize and coagulate soft tissue during surgical procedures, operating with a standard saline solution at lower temperatures.
It may not sound too exciting to the average investor.
But as boring as it may have seemed, the stock had also just fallen 28% to a 52-week-low. Yet, the company had just increased its revenue, and decreased its net loss year-over-year.
It also had a fair balance sheet with $11.8 million in cash, book value of 91 cents a share, with considerable institutional interest from 34 firms.
It didn’t deserve to trade at such a low.
So, in the May 2016 issue of The Cheap Investor, we recommended buying shares at $1.87.
Three weeks ago, the stock hit a six-year high of $5.87 for a potential gain of 204% on news of FDA clearance, and impressive earnings growth.
Second quarter sales were $9.3 million, up about 28% from $7.3 million year over year. Gross margins improved to 50.6% from 43.2% year over year, as well.
Net loss was $500,000 or two cents per diluted share, as compared to a net loss of $1.5 million, or 6 cents per diluted share year over year.
Yet, despite all of this growth, the stock was ignored for months, proving once again that small-cap research can pay off very nicely.
Every $5,000 invested in BVX in May 2016 is now worth $15,200.
As we pointed out with Goldfield Corporation (GV), Groupon (GRPN) and Accuride Corporation (ACW), this is further proof that buying even the most boring, ignored stocks is well worth it – especially if the company in question has a strong fundamental balance sheet as BVX.
The CHEAP Investor track record is proof that fundamental analysis of low priced stocks is essential to your success. We’ll continue to focus on quality, low-priced stocks with good fundamentals to keep our subscribers smiling all the way to the bank for years to come.