There’s no question that small cap stocks are having another incredible year.
Since falling to a low of 1,350 in August 2017, the Russell 2000 Small Cap Index (RUT) is now up to 1,519 – a 13% move. And we believe that rally has only just begun thanks to an improving economy and a potential tax cut that could cut the corporate tax rate from 35% to 20%.
Right now, small cap companies see a tax rate of 32%, as compared to 26% for S&P 500 companies because they have less exposure to international tax havens.
One of the many small cap stocks that have benefited from anticipation of those cuts is Fairmont Santrol Holdings (FMSA), a leading provider of high-performance sand and sand-based product solutions used by oil and gas exploration and production companies to enhance the productivity of their wells. The Company also provides high-quality products, strong technical leadership and applications knowledge to end users in the foundry, building products, water filtration, glass, and sports and recreation markets.
Recommended in the September 2017 issue of The Cheap Investor at $2.57, the stock just hit a high of $5.32 – a 107% win in just two months.
And it’s not just enthusiasm over a possible tax cut that’s sent this stock higher.
When oil prices sank to a low of $42 in June 2017, we started looking for unfairly beaten down stocks that could move the moment oil began to pivot higher. One of those stocks was FMSA, which provides high-performance sand products used by oil and gas companies to enhance the productivity of wells.
Falling from $13 in February to $2.57, we found value in FMSA.
The company had $178.5 million (80 cents per share) in cash and a book value of $1.09 a share. Institutions bought 300,000 more shares than they sold, for the quarter ended June 30, 2017. And despite heavy debt of $796.1 million, we still liked what we found.
Revenue had ballooned to $233.2 million from $114.2 million year over year. Net income skyrocketed from a loss of $87.9 million to a gain of $10.5 million, as net loss per share improved from negative 54 cents to a five-cent per share gain.
As we noted in our buy recommendation in the September 2017 issue, “If it continues to grow its revenues and earnings, the stock has the potential to move at least 50% to 100% over the next couple of years.”
However, we didn’t have to wait that long. FMSA more than doubled in just two months!
As oil prices finally recovered to $58.95, FMSA rocketed right along with it.
Fairmont Santrol Holdings proves that quality low-priced stocks should not be ignored, especially those with incredible fundamental growth. We just featured even more potential big winners in the November issue that can be found right now at TheCheapInvestor.com.