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Cheap Stocks from Russell 2000

Apr 21, 2009 - 11:45 AM EDT

Value Expectations submits:

The following table contains the two cheapest companies in the Russell 2000 from each sector based on The Applied Finance Group’s Recommendation and Value Score (explained below). All of the companies listed below are the most attractive in their sector based on AFG Recommendation, which factors in each companies Economic Margin, Intrinsic Value, and Management Quality Score. All companies listed also had the highest Value Score (upside) relative to their sector peers. Also provided is a VE analysis of each company to identify implied sales growth expectations versus what the company has delivered historically in sales growth over the past 5 years. Measuring the spread between a company’s VE sales growth expectations and what it has historically delivered should give you a good idea of which companies have the best chance of meeting or exceeding those expectations, and thus are more likely to outperform.

Given that the stock market has lost a tremendous amount of value over the past year, it is important to point out the market cap for the companies in the table. The twenty-two companies shown below have returned -53% on average over the past year vs. -33% for the Russell 2000 Index as a whole. Specifically, a few companies now maintain a market cap that some investors may define as micro caps. If micro caps are within your universe of focus, then the following table can help identify some gems to invest in, especially since micro caps (as well as small caps) have outperformed large cap stocks by about 10% since the market bottomed on March 9, 2009. However, if the “bigger” small caps are more to your liking, the table provides a good snap shot for several companies with respectable size that may outperform the Russell 2000, based on Value Score and imbedded expectations.

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Source: Seeking Alpha (Apr 21, 2009 - 11:45 AM EDT)