Though small-cap stocks present more risks and volatility for investors, it also offers arguably the largest possible returns and chance for a “ten-bagger.” With the advantage of flying under the radar, small-cap investors can be shielded from constant analyst coverage and institutional investors.
Small-cap stocks are generally defined as having a capitalization between $300 million and $2 billion. Using the All-In-One Screener, the following five stocks are the most widely held small-caps among the gurus as of the second quarter.
Barnes & Noble Inc. (BKS, Financial)
Bookstore chain Barnes & Noble is owned by eight gurus as of the second quarter, with David Abrams (Trades, Portfolio) as the main shareholder with a 7.99% stake. Jim Simons (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) are the second and third-largest shareholders, respectively.
It’s little secret that brick and mortar bookstores have struggled to compete in the age of Amazon (AMZN) and ecommerce. The stock has dropped 42% over the past year, closing at $13.19 on Sept. 14.
After posting losses from 2011 to 2014, Barnes & Noble earned 21 cents per share in 2015, compared to losses per share of $1.12 the year before.
Barnes & Noble currently pays a dividend yield of 1.12%, which is close to the three-year high. However, the company cannot afford the dividend with current earnings, due to the payout ratio of 678%.
Pier 1 Imports Inc. (PIR, Financial)
Pier1 is owned by eight gurus, with Mario Gabelli (Trades, Portfolio) as the largest shareholder with a 1.27% stake. Four of the gurus — Jim Simons (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) — initiated new positions in the stock during the quarter.
Pier 1 is a specialty retailer of decorative home furnishings including bed and bath products, candles, housewares and seasonal furnishings. The stock declined 22% over the last year and closed at $9.47 on Sept. 18. It currently trades with a P/E ratio of 12.6.
In 2015, Pier 1 earned 82 cents per share, down from $1.01 the year before. This figure has declined each year since 2012.
The company’s dividend yield is close to the five-year high at 2.74%, while the payout ratio is 34%.
Vasco Data Security International (VDSI, Financial)
Eight gurus currently own stakes in Vasco Data as of the second quarter. The largest shareholder is Chase Coleman (Trades, Portfolio) with a 4.78% stake, followed by Private Capital (Trades, Portfolio) with a 2.45% stake.
Vasco Data is a security company that develops and markets security systems to manage access to user digital assets. The stock closed at $18.63 on Sept. 18 and currently trades with a P/E ratio of 14.7.
GuruFocus rates the company’s business predictability as 3 out of 5 stars. Vasco Data earned 85 cents per share in 2014, a large improvement from 28 cents in 2013.
Vasco Data has a healthy balance sheet with a current ratio of 4.57, more than enough to cover its short-term obligations. It also carries no long-term debt.
Of the eight gurus with positions in luxury watchmaker Movado, Chuck Royce (Trades, Portfolio) holds the most significant stake at 10.99%. This is far larger than Ken Fisher (Trades, Portfolio), who holds the second-largest stake at 0.78%.
The Group’s brands include Coach watches, Hugo Boss, Juicy Couture and Lacoste. The stock price has declined 21% over the past year and closed at $26.51 on Sept. 18. It currently trades at a PE of 14.09.
In FY 2015, EPS was $2.02, an increase from $1.97 the year before.
Movado’s operating margin has increased each year since 2012, recording at 12.18% in 2015.
The company pays a dividend yield of 1.62% with a payout ratio of 22%.
As of the second quarter, eight gurus held stakes in TriMas Corp., which manufactures closing and dispensing systems for a variety of end markets such as industrial and consumer packaging applications. Richard Pzena (Trades, Portfolio) is the largest shareholder with a 2.11% stake, followed by RS Investment Management (Trades, Portfolio) with a 1.92% stake.
The stock dropped 21% over the past year to close at $16.64 on Sept. 18 and currently trades with a PE of 19.18. EPS in 2014 was $1.51, slightly down from $1.83 in 2013.
One point of caution is TriMas’ operating margin has declined each year since 2011, recording at 8.31% in 2014.
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