Back to top

Image: Bigstock

How to Screen for Top Small Cap Value Stocks

Read MoreHide Full Article

  • (0:45) - Small Cap Value Stocks Positive Performance
  • (6:10) - Tracey’s Top Stock Picks
  • (17:45) - Episode Roundup: BSET, BZH, WLKP, TGLS, PLUS, VBR


Welcome to Episode #215 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

While big caps continue to dominate Wall Street, suddenly, in November 2020, the Russell 2000, the small cap index, finally broke out to new all-time highs for the first time in 2 years.

Small caps had their best month ever in November. While that included small cap growth and value stocks, value still crushed it in the month.

The Vanguard Small Cap Value ETF jumped 19% in the last month.

But even with the recent breakout, the small caps continue to underperform.

Over the past 2 years the Vanguard Small Cap Value ETF is up just 4.8% compared to the S&P 500’s 33%.

Many small cap stocks remain cheap heading into 2021.

Screening for Small Cap Value

It’s pretty easy to create a small cap value stock screen.

Small caps can be considered companies with a market cap under $2 billion, $1.5 billion or even $1 billion, depending on how narrow you want to make the screen.

For this screen, Tracey went with $1.5 billion.

Adding on the powerful Zacks Ranks of #1 (Strong Buy) or #2 (Buy) should hopefully get you companies which have rising earnings estimates. The analysts see something good going on that they are raising, instead of cutting, those full year estimates.

For the value component, you can try the basic price-to-earnings ratio under 15 but in this screen, that combination produced 164 stocks.

That’s a lot of stocks.

Adding on the price-to-sales ratio under 1.0 narrows the screen.

It produced 60 stocks.

5 Small Cap Value Stocks with High Zacks Ranks

1.       Bassett Furniture (BSET - Free Report) is cashing in on the housing craze. In September, the company said its wholesale order rate was up 39% year-over-year. Bassett said business had “boomed” since Memorial Day. It’s still cheap with a forward P/E of 13.4.

2.       Beazer Homes (BZH - Free Report) is a home builder with a market cap of $451 million. While earnings are expected to rise 2.1% in fiscal 2021, they’re forecast to rise another 25% in fiscal 2022. It’s dirt cheap with a forward P/E of 7.5.

3.       Westlake Chemical (WLKP - Free Report) is a maker of petrochemicals, vinyls, polymers, and building products globally with a market cap of $747 million. It has a forward P/E of just 10.8. The shares have struggled this year and are still down 16.7% year-to-date. It’s a rare small cap company that is paying a dividend.

4.       Tecnoglass Inc. (TGLS - Free Report) is a Colombian company that specializes in architectural glass, windows and aluminum products. Earnings are expected to rise 13% in 2020 and 22% in 2021. It’s also dirt cheap, with a forward P/E of 7.7. It, too, pays a dividend, currently yielding 1.9%.

5.       ePlus Technology (PLUS - Free Report) provides consultative technology solutions in cloud, security and data centers. It has a market cap of $1.1 billion. In the second quarter, sales rose 5.2%. Earnings are expected to fall in fiscal 2020 by 3.3% but rise 6.3% in fiscal 2021. It’s a value, with a forward P/E of 14.2.

What else should you know about finding small cap value stocks?

Tune into this week’s podcast to find out.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Published in