Published:
August 13, 2007
The
correct answer is 
(C.) Small-Cap Value Stocks
As you can see, small-cap value
stocks have outperformed many other
asset classes over the past five
years. Since August 2002, $25,000
allocated to small-cap value stocks
would have more than doubled to
reach a current value of nearly
$54,000 -- versus just $38,000 for
large-cap growth stocks and $30,000
for government bonds. Of course,
these figures are based on
historical index returns and do not
reflect the impact of fees or taxes.
Nevertheless, it's clear that the
average small-cap value stock has
performed well over the years -- but
what about those that are better
than average?
In a recent research report
available exclusively to readers of
his premium value-investing
newsletter,
Half-Priced Stocks, Editor
Nathan Slaughter combed through the
small-cap value universe in search
of superior up-and-coming companies
trading at wide discounts to their
true fair value. Among other things,
he focused on growing young
companies with expanding margins,
light capital requirements, and
projected long-term earnings growth
of +15% or more. After an extensive
search process, he zeroed in on two
well-rounded finalists.
The first has grown from a tiny
one-store operation into a global
industry leader with more than
70,000 customers. In the process,
the company delivered 11 consecutive
years of +20% or better earnings
growth and has rewarded shareholders
with astronomical gains of more than
+1,600% over the past decade. Yet,
the firm is still relatively unknown
and has cracked just 10% of the
overall domestic market -- leaving
plenty of growth opportunities for
years to come.
The second company provides a
growing array of products used to
run everything from DVD players to
mobile phones to digital cameras.
Over the past three years, sales
have more than doubled and annual
free cash flows have swung from a $1
million loss to nearly a $100
million gain. Looking ahead, this
firm is well-positioned to cash in
on the digital revolution, and
should be a key recipient of the
transition away from analog and
toward high-definition television.
Still, despite a recent rally, the
stock is trading at a rock-bottom
PEG ratio of just 0.8.
To read this special small-cap value
report and learn the names of these
two investment ideas, please
visit this link.
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