Welcome to Episode #375 of the Value Investor Podcast.

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Even as the large cap indexes seemingly hit new highs nearly every day in 2024, the small caps have lagged. The Russell 2000 is up just 9.2% in 2024 compared to the S&P 500 gaining 16.6%.

Over the last 2 years, while the S&P 500 has gained 39.6%, the Russell is up just 21.7%.

The underperformance extends over the last 5 years as well. The Russell has gained 42% while the S&P 500 is up 86%.

With that kind of underperformance, is it any surprise that most investors have been ignoring the small caps?

Many of them have gotten cheap. If you want to find value stocks, the small caps is the place to look.

Should You Buy the Small Cap Value ETFs?

The easiest way to buy small cap value stocks is to buy a basket of them in an ETF. Tracey has covered various small cap value ETFs over the years on the podcast.

For the most basic ETFs, investors can buy the Small Cap 600 Value ETF (IJS) or Vanguard Small Cap Value Index Fund (VSIAX). Tracey discusses both on the podcast.

But many investors still want to buy those individual stocks. There is still excitement at uncovering a company and getting in when it’s still small and unknown. But how do you find good quality small cap stocks?

Screening for Small Caps with Big Growth

Zacks has several premium screens on Zacks.com for small cap stocks, including one with both growth and value.

It looks for earnings growth over 20% but the company must also have a P/S ratio under 1.0. A P/S ratio under 1.0 usually indicates a company is undervalued. A P/S ratio of 0.7, for example, means an investor is paying just $0.70 for every $1.00 of sales.

This screen also looked for company with a market cap of $2 billion or less and a top Zacks Rank of #1 (Strong Buy) or #2 (Buy).

The screen returned 23 stocks.

5 Small Cap Value Stocks with Big Growth

1.       Great Lakes Dredge & Dock Corp. (GLDD - Free Report)

Great Lakes Dredge & Dock is the largest provider of dredging services in the United States. It operates 200 specialized vessels. Great Lakes Dredge & Dock has a market cap of $625 million.

Shares of Great Lakes Dredge & Dock are up 15.8% year-to-date. It’s still cheap with a forward P/E of 12.6.

2.       HanesBrands (HBI - Free Report)

HanesBrands makes everyday apparel under the brands Hanes, Champion, Bonds, Maidenform and Bali. However, it entered into an agreement to sell Champion in June 2024. HanesBrands has a market cap of $1.86 billion.

Shares of HanesBrands are up 19.3% year-to-date but took a tumble over the last 5-years, falling 67.8%. It’s cheap, with a forward P/E of 11.9.

3.       Lands’ End, Inc. (LE - Free Report)

Lands’ End is a digital retailer of apparel, accessories and footwear. It also operates some brick-and-mortar stores. Lands’ End has a market cap of $543 million.

Shares of Lands’ End have soared 77% year-to-date. It’s not cheap on a P/E basis with a forward P/E of 56 but it has a P/S ratio of just 0.4.

4.       Phibro Animal Health Corp. (PAHC - Free Report)

Phibro Animal Health is an animal health and mineral nutrition company with 780 product lines in over 80 countries. It has a market cap of $771 million.

Shares of Phibro Animal Health have jumped 61% in 2024 but are still down 63% over the 5-year period. It has a forward P/E of just 13.2.

5.       Wolverine World Wide, Inc. (WWW - Free Report)

Wolverine World Wide is a marketer and licensor of branded casual, active lifestyle, work, outdoor sport, athletic, children’s and uniform footwear and apparel. Its portfolio includes Merrell, Sweaty Betty, Hush Puppies and Stride Rite. Wolverine World Wide has a market cap of $1.04 billion.

Shares of Wolverine World Wide have jumped 52% in 2024 but over the last 5 years, they are still down 69%. It’s cheap with a forward P/E of 15.9.

What Else Should You Know About Small Cap Value Stocks?    

Tune into this week’s podcast to find out.

• (0:20) - Is Now A Good Time To Invest Into Small Cap Stocks?
• (3:00) - Two Value ETFs To Consider For Your Portfolio
• (14:00) - Tracey’s Top Stock Picks
• (27:15) - Episode Roundup: GLDD, HBI, LE, PAHC, WWW

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