By David Sterman
I like to track all the stocks I write about, maintaining watch lists by various categories. One of my favorite categories, "small cap stocks under $10," has been a tried-and-true group for me over the years.
Here are four of these stocks I'm focusing on right now. Each of them appears to have solid upside in the year ahead.
1. Maxwell Technologies
In the face of an air pollution epidemic, the Chinese government is finally getting serious. Any technologies that can sharply cut emissions from power plants and transportation are getting a fresh look, and this company could be a clear beneficiary. Maxwell makes ultra-capacitors, which can deliver huge amounts of power in short bursts. The products are especially well-suited in transportation, in vehicles such as city buses.
China has already been a strong customer in the past, as this article
written by a sales executive at the company notes.
But China has delayed renewing a subsidy program for hybrid buses. Shares have traded off a bit in the past few months in the face of such delays.
I look at this stock's performance in 2014 in a binary fashion. If China doesn't renew those subsidies, then shares are likely to be rangebound. But if China moves ahead with the renewed subsidization of hybrid buses using ultra-capacitors, shares would quickly move into the low teens in anticipation of firmly rising sales in 2014 and 2015.
I profiled this biotech
back in September as one of three low-priced stocks with huge potential upside. While Merge Healthcare
) has traded down in the face of still-weak hospital spending, the other two picks have fared quite well.
I think much of the near-term upside for Lionbridge Technologies
) has already played out, but I see continued momentum for Novavax. As I noted back in September, the company is pursuing treatments for several kinds of viruses, and thus far has delivered very impressive clinical testing data.
Now that we may be looking at the early signs of another bird flu epidemic
in Asia, Novavax may start to gain a considerable amount of buzz. The current strain, known as H7N9, has been the target of the company's recent efforts, and if this pandemic spreads, you'll be hearing a lot more about Novavax.
In mid-November, Novavax published a notice in the New England Journal of Medicine
that cited protection against bird flu for 81% of people who took the company's vaccine. As a company executive noted: "Past H7-based vaccine candidates have been poorly immunogenic and thus could not be advanced as viable vaccine candidates. This risk appears to have been overcome by our H7N9 adjuvanted VLP vaccine."
Looking beyond this potential catalyst, Novavax is conducting several clinical trials, setting the stage for updates over the next few quarters. Each time the company delivers positive efficacy and safety data, shares should tick a bit higher. Of course, the best catalyst would be a partnership with a major pharmaceutical company, which would validate Novavax's technology and strengthen its balance sheet.?
Some of my best investment ideas come from my astute research colleagues here at StreetAuthority. And this recent pick from Dave Forest, who helms our Junior Resource Advisor newsletter, got my attention. Though I am bit wary of gold stocks at the moment, this gold producer holds an irresistible value proposition.
This miner, which is virtually debt-free, is among the industry's lowest-cost producers, meaning it's solidly profitable at current gold prices -- and would still likely remain profitable even if gold prices pushed 20% lower from here. Dave noted a few months ago that "the company's cash cost of production in the second quarter of 2013 was an ultra-low $395 per ounce of gold." Even accounting for overhead, Dave figures that the "all-in" cost is $700 per ounce.
Still, the ongoing drop in gold prices, to a recent $1,230 an ounce, hasn't spared this stock in the sector-wide sell-off. The company's market value has fallen below $600 million (and less than $400 million when net cash is excluded), but Dave thinks the company can generate $200 million in annual profits. If he's right, then this stock is one of the deepest bargains on the market.
4. Axcelis Technologies
Lastly, I remain a big fan of this chip equipment provider, which I profiled on our sister site ProfitableTrading.com
, roughly a month ago. As I noted back then, backlog is growing, customer interest in its new product lines is increasing, and sales and profits look poised for a solid upturn in 2014. We'll have to wait until early February to hear a quarterly business update, but I expect to hear even more bullishness from management about the traction that new products are getting.
Risks to consider: Small-cap stocks are often economically sensitive, so we'll need to see a positive macro backdrop in 2014 for stocks like these to move into favor.
Action to take: Each of these four companies are pursuing very different niches, but all show signs of delivering solid financial results in 2014. I've got them on my small-cap watch list and see them as some of the biggest potential gainers for the year ahead.
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