Recent price drops place some small stocks in the bargain bin
The past three months or so have not been all too kind to small stocks. The Russell 2000 (RUT), from February 18's close to Friday's close (May 16), was down over 5%.
The Zacks Microcap Index (ZAX), over the same period, was down about 5.5%.
Needless to say, the road has been tough for small companies recently. However, as we head into the final month of spring, the recent slide in the small stock marketplace has put some companies on sale. Now, we are not talking about all small stocks. But, there are a few who have performed well fundamentally, increasing their value, that have still managed to take a tumble.
Let's look at one of our past recommendations that is now above the $3 mark. This company is a potential buying opportunity because of its recent dip in share price.
**If you follow the Bowser Game Plan, this company is out of the Bowser buying range because it trades above $3/share.**
Atlantic American Corp (AAME)
We first recommended Atlantic American in February 2012, when it was trading for $2.05/share. As seen in the chart above, AAME traded at close to $4 in mid-February. However, this past Friday, the company closed at $3.37--a decrease of over 14%.
Despite the decrease in share price, the company posted a 17% increase in revenues for the fourth quarter 2013, and a 12% increase in revenues for the first quarter 2014. AAME posted a 60% increase in fourth quarter 2014 net income, and a slight 11% decease in net income for the first quarter of 2014. Since 2011, the company's earnings per share (EPS) value has increased from $0.16 to $0.52 (+225%). Atlantic American has $1.31/share in cash, and a book value of $4.90. The company has paid $0.02/share in cash dividends over the past year.
Despite these fundamental measures, AAME is down with the rest of the market. While it is down, we think that the price drop solidifies the company as a legitimate buying opportunity for those looking for companies trading above $3/share.
Throughout our newsletter, there are a number of other stocks "on sale" because of recent downtrends, despite increases in fundamental value. To find out which companies fall into this category, stayed tuned for the June 2014 newsletter in which we will profile a few of them. If you are not subscribed to the newsletter, make sure to do so TODAY so you don't miss this upcoming article!
Great job, Thomas! I am eagerly enjoying your news letters and posts. Keep up the effort. It is greatly appreciated.
Thanks for the recommendation and company update.