Our small-cap portfolio employs strategies used by Chuck Royce, founder of Royce Funds and a pioneer in small-cap investing.
We based our screen on Royce's time-tested technique for identifying profitable and well-run small caps - those with market values of $250 million to $2.5 billion. We required at least 8% return on assets (net income divided by total assets) and positive free-cash flow (Royce did not comment on our screen).
We also looked for low P/E and price-to-book ratios relative to the Russell 2000 index. And we considered only small caps with share prices below $35, as they are less likely to be covered by Wall Street analysts or heavily owned by institutions, giving regular investors a leg up.
Our small-cap choices last year posted an enviable 28% gain.
Company
(Ticker symbol) |
Current
price |
52-wk
high |
52-wk
low |
Market
Cap (mill) |
P/E
ratio |
Return
on assets |
Free Cash
Flow |
| CSG Systems International (CSGS) |
$26.74 |
$28.45 |
$23.05 |
$1,160.09 |
19.3 |
9% |
$82 million |
| Grey Wolf (GW) |
$7.86 |
$8.29 |
$6.10 |
$1,453.06 |
7.8 |
20% |
$91 million |
| Hercules (HPC) |
$17.61 |
$21.40 |
$12.00 |
$2,053.19 |
13.6 |
9% |
$79 million |
| K-Swiss (KSWS) |
$27.77 |
$37.81 |
$22.54 |
$962.15 |
13.9 |
19% |
$62 million |
| Navigant Consulting (NCI) |
$20.38 |
$23.28 |
$17.27 |
$1,184.08 |
20.4 |
9% |
$56 million |
| Park Electrochemical (PKE) |
$28.80 |
$33.70 |
$23.05 |
$581.70 |
16.4 |
9% |
$6 million |
| Penn Virginia Resource (PVR) |
$29.65 |
$31.21 |
$22.90 |
$1,247.11 |
19.0 |
10% |
$31 million |
| Plexus (PLXS) |
$21.89 |
$36.09 |
$15.78 |
$1,014.23 |
13.4 |
10% |
$71 million |
Current price, 52-week high/low and market cap as of Jun 12 13:20
P/E based on earnings for the last 12 months.
Earnings growth based on analyst projections for the next five years, according to Baseline. |
