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Three Surging Small Caps

Posted: Jan 19, 2010 11:07 AM by Billy Fisher

Tickers in this Article: AMED, BID, JASO, PBW, TAN

While the small cap space may carry higher degrees of risk and volatility than other areas of the market, it can also offer the potential for outsized rewards. As the broader markets continue to head higher, it's no surprise that a number of small cap stocks have shifted into outperform mode. Here are three small cap stocks in particular that have been surging up the charts in recent weeks.

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Day In The Sun
The China-based solar cell maker JA Solar Holdings (Nasdaq:JASO) has seen its stock price go on a tear since the beginning of December. JASO shares have risen 45% since then. The company is confident that 2010 will be its year to shine.

JA Solar's VP of business development recently said that the demand for solar power should rebound in 2010 and then grow at a pace of 30% per year over the next few years. Pricing for solar cells could tick downward ever so slightly in Q1 of 2010, however.

The bullish outlook for solar has also translated into strong advances by ETFs with a focus on solar power and other sources of clean energy such as the Claymore/MAC Global Solar Energy Fund (NYSE:TAN) and the PowerShares WilderHill Clean Energy Fund (NYSE:PBW).

Strong Vitals
Another small cap that has had a big run since the beginning of December is the home health care provider Amedisys (Nasdaq:AMED). The stock has surged 45% since December 1 and has exhibited few signs that it is letting up.

At the end of October, the company reported a record Q3 with net service revenue and net income spiking 20.7% and 53.0%, respectively, on a year-over-year basis. The company has benefitted from an aging population and the use of therapy programs by more of its home health agencies.

On The Auction Block
Rounding out this list of surging small caps is the auctioneer Sotheby's (NYSE:BID). Shares of BID have climbed 35% since the beginning of December. After losing 75% of its market value in 2008, this stock bounced back with a 156% gain in 2009 as collectors began to tiptoe back into the art market.

Sotheby's reported a net loss of $80.1 million for the first nine months of 2009 compared to net income of $35.8 million over the same time period in 2008. The company has experienced a strong pick-up in auction commission margins thanks to cost reduction measures and product mix changes. Sotheby's is clearly operating in a tough environment, but even the slightest improvements in the economy will go a long way towards sustaining this stock's momentum in 2010.

The Bottom Line
These three small cap companies come from completely different sectors. The movement in their stock prices demonstrates the upside potential that small cap stocks can have in rising markets. The question that remains is whether these stocks will continue to advance or if they are due for a pullback. Regardless of initial sentiment, investors would be advised to conduct their own due diligence before buying or selling one of these small cap stars. (To learn more, see Small Caps Boast Big Advantages.)

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By Billy Fisher

Filed Under: Stock Analysis,Stocks

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