With the election over and a Trump victory looking likely, small-cap stocks could be a major beneficiary. Not only are small-cap stocks cheap compared to their large-cap counterparts, but they also saw significant outperformance the last time Trump won. But not all small-cap stocks are equal. So we thought it would be a good time to look at the highest scoring small-cap stocks using Validea’s guru models, which are based on the strategies of legends like Warren Buffett, Peter Lynch and Ben Graham.
Here are five stocks that score particularly well across multiple value-focused investment approaches:
Hamilton Insurance Group (HG) – Strong on Lynch and Fisher Models
Hamilton Insurance Group, a Bermuda-based specialty insurance provider, scores highly on Peter Lynch’s value-growth methodology with a perfect 100% rating. The company’s PEG ratio of 0.25 is particularly attractive, indicating it’s potentially undervalued relative to its growth rate. With a P/E of just 4.3 and historical EPS growth of 17.1%, it exemplifies Lynch’s preference for companies with growth potential at reasonable prices.
The stock also performs well on Kenneth Fisher’s Price/Sales strategy, which favors companies with strong fundamentals trading at low valuations relative to their sales. Hamilton’s debt/equity ratio of 34.69% suggests reasonable financial leverage, while its strong profit margins and healthy equity/assets ratio of 29% indicate financial stability in its insurance operations.
Ingles Markets (IMKTA) – Top Graham and Value Composite Scores
Ingles Markets, a southeastern U.S. supermarket chain, earns a perfect 100% score on Benjamin Graham’s deep value criteria – a rare achievement given Graham’s stringent requirements. The company’s strong current ratio of 2.99 and minimal long-term debt relative to net current assets align perfectly with Graham’s focus on financial stability and defensive characteristics.
Additionally, IMKTA scores 100% on James O’Shaughnessy’s value composite model, which combines multiple value metrics including price-to-book, price-to-sales, and price-to-cash flow ratios. With a P/E ratio of 7.4 and price-to-book ratio of 0.76, the stock exhibits classic value characteristics while maintaining strong operational metrics.
Perion Network (PERI) – Excelling in Price/Sales Metrics
Digital advertising technology company Perion Network stands out with a perfect 100% score on Kenneth Fisher’s price-to-sales methodology. The company’s P/S ratio of 0.56 falls well below Fisher’s 0.75 threshold for non-cyclical companies, suggesting potential undervaluation. The company’s remarkably clean balance sheet with zero debt is particularly noteworthy.
PERI also scores well on Peter Lynch’s growth at a reasonable price approach, earning a 100% rating. The company’s combination of a low P/E ratio (5.1) and strong historical EPS growth rate (37.6%) creates an attractive PEG ratio that would have appealed to Lynch’s investment style.
Visteon Corp (VC) – Strong Price/Sales and Lynch Model Ratings
Automotive technology company Visteon Corporation earns high marks on Kenneth Fisher’s price-to-sales methodology, scoring 100%. With a P/S ratio of 0.65, it trades below Fisher’s key threshold while maintaining strong profitability metrics. The company’s focus on digital cockpit electronics and advanced driver assistance systems positions it well in growing automotive technology segments.
The stock also scores 93% on Lynch’s methodology, with its moderate P/E ratio of 5.0 comparing favorably to its 33.1% historical EPS growth rate. The company’s debt/equity ratio of 27.34% suggests conservative financial management.
Olympic Steel (ZEUS) – Value Composite and Graham Model Leader
Metal service center operator Olympic Steel scores exceptionally well on O’Shaughnessy’s value composite model (92%) and Benjamin Graham’s deep value criteria (86%). The company’s price-to-book ratio of 0.72 combined with a P/E of 11.89 creates an attractive value profile that would have appealed to Graham’s conservative investment approach.
The stock also performs well on Peter Lynch’s methodology (93%), with its moderate P/E ratio and 35.8% historical EPS growth rate creating an attractive growth-at-a-reasonable-price profile. The company’s strong current ratio of 3.77 and manageable debt levels align with Graham’s preference for financial stability.
Common Themes and Considerations
Several common characteristics emerge across these five stocks:
- Low price-to-sales ratios, typically below 0.75
- Strong balance sheets with manageable debt levels
- Significant historical earnings growth rates
- Single-digit or low double-digit P/E ratios
- High scores on multiple value-oriented investment models
While there is no guarantee history will repeat itself, if small-caps do resume their market leadership, these could be some interesting names to look at.
Further Research
