Three small caps to beat the headwinds
Today's Financial News - Posted October 26, 2009
The equities market is deep in the red today after surging out of the gate. As the dollar’s value fluctuate investors are in for a wild ride. Get rid of the volatility by buying small caps.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): It has been a crazy day for investors. Up. Down. Up. Down. When the dollar sinks, the equities market rallies. When the greenback regains its strength, the Dow turns around.
I don’t know about you, but I don’t like my financial security riding on the back of the greenback and the government that controls it.
A portfolio overloaded with currency risk is extremely dangerous. The added leverage can destroy an otherwise adequately diversified asset allocation.
Fortunately there is a solution that still offers strong appreciation potential: small caps.
Because the smallest of the nation’s publicly traded firms rarely have large export businesses, their fiscal success is typically independent of currency fluctuations.
That means when the markets are deep in the red, small caps have no material reason to follow suit. That is why most of the day’s big winners come from smack dab in the heart of small-cap country.
Too small to fail
Take ParkerVision (NASDAQ:PRKR), for instance. Shares of the $120 million wireless technology firm are up by nearly 30% today thanks to news that a commercial chipset customer has verified the company’s d2p technology exceeded its baseline expectations.
The unnamed customer, a global wireless chipset supplier, announced that the technology consumed less energy across the transmitting spectrum than the technology it was designed to replace.
This is fantastic news for ParkerVision that is very similar to the news that sent shares of heavy-equipment manufacturer OshKosh (NYSE:OSK) up by over 500% in the past six months.
It all starts with just one breakthrough or contract.
Another example of the power of small cap investing is Collectors Universe (NASDAQ:CLCT). With word that the collectible grading and authenticating company is once again firing up its dividend machine, shares are surging by over 20%.
If you are a fan of signaling theory, you will take the news that the company plans to offer a $0.25 quarterly dividend as a surefire sign the company’s management is satisfied with its capital structure and its market-beating growth potential.
It is rare that a $50 million company pays a dividend, especially a 15% dividend, so take this as a signal that the future looks rock steady for the small company.
More importantly, take this as evidence that share price is going to make quick gains from here as more and more investors try to lock in the income.
They grow up fast
Finally, it is tough to consider one of the largest trucking companies in the nation, YRC Worldwide (NYSE:YRCW), a small-cap, but with a $250 million market value and a $4 per share price tag, it fits the definition close enough.
Over at TFN Strategic Trader, we proved the profit potential of small cap investing by locking in gains of 94% from the trucking giant just a couple of weeks ago.
While we closed out our covered call position when shares were higher, shares of the trucker are up once again today by nearly 17% thanks to a mid-day spike of buying activity.
Rumor has it a new long-term financing deal is on the way. If it’s true, this one won’t be in the small cap realm for long and our $4.08 exit price may look downright cheap.
No matter what happens, the move is proof that the small-cap sector has the power to move forward in even the strongest of headwinds.
Next Article: TFN eNews 10/26/2009: The bearish case for natural gas
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