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Small cap ideas

For the majority of the last decade, small caps were my calling card.  They were almost the only thing I traded.  I was forever in search of the next home run.  Some of the picks worked, some didn’t.  Enough of them worked well enough that I generally outperformed the indexes by a sizeable margin.

With that as my introduction, here are a couple ideas for small cap flyers, in no particular order – mostly taken from others (as all good ideas are):

NEI:

This one is my own: NEI.  Network Engines used to trade under the ticker symbol NENG and I owned it a couple different times in the last decade.  It’s a turnaround story made good by CEO Greg Shortall, who came to the company a few years ago.  He’s turned it around and it’s now generating consistent profits and showing good revenue growth.  Most interesting to me, it looks like NEI has broken to the upside of a falling wedge.  This action typically leads to higher prices.

The next idea is a Brazilian fast food company that is in the process of blasting off:  BOBS.  The idea came from this article on Seeking Alpha.  There has been very big insider buying in the last few months, and it is still carrying a reasonable P/E of 11, with growth that is well north of that.  The Brazilian culture is more like our own than much of the emerging Far East – that is to say, they spend their money.  I will wait for a pullback, but it seems like good value with a good story and environment.

Next comes an idea from a friend of mine: LLNW.  They are a streaming video competitor of Akamai’s.  The fundamentals don’t necessarily impress me, but tech companies are often money losing ventures in their early years, and LLNW is at least growing revenues consistently.  Technically, it looks to me like they are on support, so if you like the idea, this could be a pretty good entry point.

I thought I had sworn off Chinese stocks, but then I saw this article on Zero Hedge regarding: BYDDF.  The author’s ideas don’t always pan out so well, but one thing he said is true: Warren Buffett sunk millions  into buying 10% of the company.  It is an electric car play to bury in your portfolio in hopes for an eventual home run.  With Charlie Munger and Buffett convinced, my own recent skepticism of Chinese books (ironic, given that I was “all-Chinese-ADR’s all-the-time” for much of the last decade) is assuaged.  BYDDF is in a longterm downtrend, so there’s not necessarily any reason to think the stock is about to rally, but there has been pretty good volume in some of the recent green days and they appear to be near support.

I don’t actually own any of these stocks at the moment, but I will likely purchase shares of at least one sometime in the next week.

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