Much like small-cap stocks, micro caps (generally defined as capitalizations between $50-300 million) offer opportunities for very large growth, but also present significant risk and volatility.
Over the last year, the Russell Microcap Index returned 11.19%, slightly underperforming the Russell 3000 return of 11.86%. When looking over a three-year period, the Microcap index returned 20.89% compared to Russell 3000’s 19.92%.
Using the All-In-One-Screener, the following five stocks are the most widely-held micro caps among the gurus as of the first quarter.
Enzon Pharmaceuticals (ENZN, Financial)
Five gurus currently hold positions in Enzon Pharmaceuticals as of the first quarter. Carl Icahn (Trades, Portfolio) is the largest shareholder with 13.37% of shares outstanding. Enzon develops therapeutics for cancer patients with high unmet medical needs.
Over the past year, the stock price rose 11%, and closed at $1.22 on June 22. The current P/E ratio is 1.94 and the P/S ratio is 1.97. When comparing the stock price to the Peter Lynch earnings line, Enzon appears to be undervalued.
In 2014, Enzon reported EBITDA per share of $0.65, up from $0.40 the year before. Net income also increased last year to $28.8 million, up from $18.15 million in 2013.
Aviat Networks (AVNW, Financial)
Four gurus have stakes in Aviat as of Q1, with Arnold Schneider (Trades, Portfolio) as the largest shareholder with 7.5% of shares outstanding.
Aviat manufactures wireless networking products to mobile and fixed operators, government agencies, and broadcast network operators. The stock declined marginally 3% over the past year, and closed at $1.17 on June 22. The forward P/E ratio is 55.87 and the P/S ratio is 0.22.
The company has not posted a profit since FY 2000; net loss in 2014 was $51.2 million.
Free cash flow also declined in 2014 to -$38.7 million, down from -$2 million the year before.
Edgewater Technology (EDGW, Financial)
Jim Simons (Trades, Portfolio), John Rogers (Trades, Portfolio), and Mario Gabelli (Trades, Portfolio) each hold positions in Edgewater Technology. Rogers is the largest shareholder with 15.83% of shares outstanding.
Edgewater is a consulting firm that provides services in the areas of business advisory, analytics, data management and technology. The stock declined 8% in the past year, and closed at $7.26 on June 22. The company’s P/E ratio is 40.6 and the P/S ratio is 0.83.
EBITDA per share has been increasing each year since 2008, and recorded at $0.65 in 2014. The graph below shows the earnings trend over time.
Net income, however, took a hit last year to $4.1 million, down from $34.7 million the year before.
John Paulson (Trades, Portfolio), Jim Simons (Trades, Portfolio), and Prem Watsa (Trades, Portfolio) are the three gurus with current positions in Dex Media, which provides marketing solutions for businesses. Paulson is the largest shareholder with 12.66% of shares outstanding.
Dex posted a net loss of $371 million in 2014, which was an improvement from the net loss of $819 million the year before.
Last year, free cash flow was $370 million, up from $336 million in 2013. Over the past year, Dex’s stock dropped 93%, closing at $0.85 on June 22.
Dover Motorsports (DVD, Financial)
John Rogers (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), and Jim Simons (Trades, Portfolio) hold stakes in Dover Motorsports as of Q1. Rogers holds the largest position with 9.18% of Dover’s shares outstanding.
The company operates the Dover International Speedway in Dover, Delaware, and the Nashville Superspeedway near Nashville, Tennessee. The stock declined 23% in the last year, closing at $2.27 on June 22. The current P/E ratio is 32.43 and the P/S ratio is 1.8.
In 2014, Dover reported net income of $3.15 million, up from $2.02 million the year before.
The current dividend yield is 2.2%, which is close to the two-year high, while the payout ratio is 69%.
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