Small-cap stocks have some of the largest growth potential in the 2nd half of 2010. Below are some of my favorite picks:
EZchip Semiconductor (EZCH) Known for designing high-speed networking equipment chips. They had a solid first quarter as revenue gained 38% and now they are sitting on $75 million of cash with no expenses or debt. I believe this is a strong technology bet and I place a target of $30.
Panera Bread (PNRA) Most of you have probably eaten at one of these franchise bakery-cafes. If not I highly recommend it, as for the company itself they are exceptional. Profit soared 50% in the first quarter, operating margins rose several percentage points, and Panera is sitting on $300+ million of cash. Right now it’s at a 30% discount to its peer averages and the stock is very cheap when valued against future earnings. Strong buy expect it to rise to $105.
Dominos Pizza (DPX) With the recent transformation of their whole menu many were skeptic on how this would translate into sales. Well they have exceeded expectations, franchises are rapidly expanding and sales numbers are climbing making Dominos a solid investment. Expect $18 in 12-months.
Manitowoc (MTW) Some are touting this as a home run trade. I agree it has high-risk high reward benefits. With incremental savings from cost cutting initiatives, strong sales outlook, and wider margins this stock could very likely double in the next 12-months.
Rackspace Hosting (RAX) This computing specialist that provides web-based IT systems has soared 60%+ in the past year. With a P/S above 3 and Price to Cash of 10 this stock is poised to continue to soar and outperform it’s peers. $25 in a year is a realistic bet.
Texas Instruments Incorporated (TXN) How do they make their money? TXN makes the PA Duplexer Module and the CDMA PA that goes into every iPhone. With a PEG ratio of 0.2 reveals huge discount compared to peers. This is a cash rich company and one I feel will be a strong performer within the next year.
Omnivision (OVTI) They make the 5-megapixel sensors in the camera of every iPhone. Along with this they carry a strong balance sheet and upbeat earnings expectations boding well for future growth.