Jim Oberweis Bullish on Small Cap Stocks

Monday, 09 Jan 2012 07:00 AM

By Dan Weil

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Many stock market investors are now opting for blue-chip dividend shares as a safe haven from the recent turbulent trading. But Jim Oberweis, president of Oberweis Asset Management, is a contrarian. He favors small-cap stocks.

“Over a long period of time we always like small caps, because that’s where you get pricing inefficiencies,” Oberweis tells Forbes magazine publisher Steve Forbes.

“There just aren’t as many folks fishing in the pond among smaller companies, and that’s where we find missed valuations.”
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At the moment, small cap stocks, particularly high growth shares, are extremely cheap, he says. “In part, that’s because uncertainty’s high,” Oberweis notes.

“But that’s always when valuations are low, and it gives us really terrific opportunities to find bargain names at reasonable prices.”

Morningstar’s small-cap growth stock index had a total return of negative 1.6 percent for the past year, compared to a positive 2.2 percent for its large-cap stock index.

In choosing stocks, Oberweis and his colleagues cast a wide net. “We look at every company under $1 billion in market cap that reported 30 percent-plus year-over-year growth in revenues and earnings per share in the last quarter,” he says.

In the S&P SmallCap 600 Index, the utilities sector was strongest last year, according to Moneyshow.com.

It lists El Paso Electric (Ticker: EE), UIL Holding (UIL), New Jersey Resources (NJR), and Piedmont Natural Gas (PNY) as strong performers in this sector.




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