Sometimes, smaller is better.
Ever since the election wrapped up in early November 2016, the Russell 2000 has jumped 11%, as compared to the 2.7% gain on the S&P 500.
That means the Russell 2000 outperformed the S&P 500 by 307% in just weeks, as investors continue to bet that such stocks could benefit from President-Elect Donald Trump’s proposed economic policies.
The idea is that smaller companies may benefit even more, since they are less exposed to a potentially more protectionist approach to trade. In fact, according to The Wall Street Journal, that and a stronger dollar “could hurt multinationals and leave smaller, domestic companies relatively better off.”
Without a doubt, larger cap stocks have been trounced by small caps.
Beneficiaries of the latest rally have included Hudson Technology (HDSN) whose shares have rocketed 55% since the election.
The Pearl River, New York-based Company is part of an explosive $15 billion a year refrigeration equipment industry that The Cheap Investor last recommended in the February 2016 issue at just $2.85 a share.
It recently hit a high of $8.50 for a potential gain of 198%.
At the time of our February 2016 recommendation, shares of Hudson were trading at $2.85, or 40% off its 2015 high of $4.75. Yet, despite the correction, the stock had a fair balance sheet with $1 million in cash ($0.03 per share), and book value of $1.55.
Quarterly revenue had just increased 42% year over year.
Gross margins increased to 20%, as compared to 10% a year earlier. Even net income rocketed to $1.1 million from a year earlier off of $108,000.
While Wall Street investors ignored it at the low, we thought it was a bargain.
As we’ve pointed out with Goldfield Corporation (GV), Groupon (GRPN), Accuride Corporation (ACW) Trio-Tech International (TRT), and now Hudson Technology (HDSN) small-cap stocks offer some of the greatest rewards.
The CHEAP Investor’s track record is proof that low-priced stocks are essential to your portfolio success.