Small cap stocks are still one of the best bets on the market, and further upside is likely.
Even Credit Suisse analysts agree, recommending that investors favor small-cap stocks over large caps over the next six to 12 months based on economic indicators and valuations, as reported by Barron’s.
“We’re not pounding the table,” they’re quoted as saying. “We’re more neutral short-term, but we think it would be dangerous to be underweight long-term because valuations usually come home to roost.”
Other fund managers say they expect the small-cap rally to continue well into 2018.
Even better, small-cap stocks have a history of outperforming 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 attention, the trick to succeeding is to find ones with growing earnings and the potential for sizable returns. Luckily, we excel in uncovering small-cap stocks that soar from our recommendation.
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 March 2015, The Cheap Investor recommended the stock at $2.76 a share after watching it fall from an August 2014 high of $5.44. Earnings were beginning to show signs of improvement. Yet, the Street ignored it.
We recommended the stock again in the February 2016 issue at $2.40 a share.
While revenue was down slightly for both the second quarter and six-month periods ended December 2015, the company had $4.5 million ($1.27 per share) in cash and a book value of $5.23 per share. It was also growing, with gross margins improving to 26.4% from 25% year over year. Operating expenses fell to $3.66 million from $3.92 million, year over year. Income from operations for the first half of the fiscal year had increased to $627,000 from $314,000 the previous year.
In short, the fundamentals were great. Again, Wall Street ignored it. Too bad for them.
The stock recently reported excellent financial results, and it exploded to a high of $8, returning potential gains of 190% and 233% from our buy recommendations.
For the first fiscal quarter ended September 30, 2017, revenue increased to $10,945,000, up from$8,971,000 for the same quarter last year. Net income doubled to 16 cents a share on 22% growth in revenue. Manufacturing revenue increased 29.8% to $4,765,000 for this year's first quarter compared to $3,671,000 for the first quarter a year ago.
Gross margin for the first quarter of fiscal 2018 increased 17.0% to $2,760,000 compared to $2,358,000 in the same quarter last year.
Trio-Tech’s CEO, S.W. Yong, Trio-Tech's noted:
"Trio-Tech's excellent first quarter financial results speak for themselves: Revenue increased sharply in each of our business segments, driving commensurate gains in operating income, net income and earnings per share versus the first quarter of last fiscal year. Our Singapore and Tianjin, China operations were especially strong, and business conditions there currently appear likely to remain favorable. This was our strongest quarterly financial performance in quite some time, a tribute to the hard work and dedication of Trio-Tech's entire team, and we are optimistic regarding the remainder of the year."
Trio-Tech again proves that fundamental analysis is essential to your success. All The Cheap Investor had to do was pay attention to what others chose to ignore for far too long, and our subscribers are reaping huge rewards.