Small cap stocks have been some of the best performers in the market.

In fact, since the year began, the Russell 2000 is up 18%, while the Dow Jones rallied 11%. 

The S&P 500 and NASDAQ have both gained just 9%.

Even small-cap ETF, the iShares Russell 2000 (IWM) set an all-time high of 130.26 in recent days, crossing a previous record of 129.10.

Fund managers say they expect the small-cap rally to continue well into 2017, as the newly elected Trump Administration puts its policies in place. 

For some history, small-cap stocks have outperformed large-caps, returning an average gain of 12% a year over the last 90 years, as compared to a 10% annualized gain on the S&P 500, as reported by Market Watch.

Nowadays, as smaller cap stocks gain further attention, the trick to succeeding is to find small-cap stocks with growing earnings in a market strewn with shipwrecks.

Trio-Tech International (TRT) is a perfect example.

It’s a diversified business group with interest in semiconductor testing services, manufacturing and distribution of semiconductor testing equipment and real estate.

In February 2016, the stock had just fallen 25% to a low of $2.40. 

While revenue was down slightly for both the second quarter and six-month periods ended December 2015, the Company had an excellent balance sheet with $4.5 million ($1.27 per share) in cash and a book value of $5.23 per share. 

The Company was growing, with gross margins improved to 26.4% from 25% year over year.  Operating expenses had decreased to $3.66 million from $3.92 million the previous year.  Income from operations for the first half of the fiscal year had increased to $627,000 from $314,000 year over year, too.

In short, the fundamentals were great.

And it didn’t deserve such a low stock price.  So, in the March 2016 issue of The Cheap Investor we recommended the stock at $2.76. 

It hit a high of $4.19 in September for a potential gain of 52% in just six months.  The stock soared because it announced excellent first quarter results.  Revenue jumped 13.1%, operating income increased by as much as 26.1%, and its cash position jumped another $1.20 a share.

As we’ve pointed out with Goldfield Corporation (GV), Groupon (GRPN), Accuride Corporation (ACW) and now Trio-Tech International (TRT), small-cap stocks can offer some of the greatest rewards. 

The CHEAP Investor’s track record is proof that low-priced stocks are essential to your portfolio success. 

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