3 small-cap buys for September

A buyout frenzy on Wall Street makes these picks very desirable.

By InvestorPlace Sep 7, 2010 8:45AM

By Louis Navellier, InvestorPlace.com


A 21-month run of rock-bottom interest rates has created a perfect environment for corporate bonds, and as bond yields fall, bond prices rise and investors and companies have made out like bandits.


This has put so much cash in corporate coffers that cash (as a percentage of S&P 500 market capitalization and excluding financials) has soared from just 3% of market value back in 1999 to more than 12.5% today.


This cash is burning a hole in the pockets of many companies, and they are starting to use it to make bids for other companies so they can grab market share and expand on the cheap.


That's great news for small-cap stocks with strong fundamentals, since these are always prime buyout targets. To help you position yourself for big gains this September, here are three top small-cap stocks going strong: 

Valeant Pharmaceuticals International (VRX) develops drugs used to fight epilepsy, Parkinson’s disease, migraines, acne and even skin cancer. In August, VRX announced outstanding earnings for the second quarter including profit of $57.1 million, or $0.69 per share, compared with $0.52 per share in the second quarter of last year. Additionally, the company reported sales of $255.6 million compared with sales of $191.7 million in 2009. Those numbers tally out to a +9.5% earnings surprise and a +6.9% sales surprise!


While the Dow Jones gave up almost -5% in August, Acme Packet Inc. (APKT) moved decidedly in the other direction with a +20% gain. The communication company’s CEO recently discusses his company’s plans for the future, including a big push into Voice Over Internet Protocol (VOIP) to replace conventional phone networks. This move towards software and applications that exist above the IP-level rather than on physical routers will give Acme an edge over competitors like Cisco (CSCO) and Juniper (JNPR).


Radcom Ltd. (RDCM) is an Israeli tech powerhouse that posted strong quarterly earnings last month. The test equipment and software company is benefiting from strong investor interest in the Israeli tech sector, one of the largest and fastest-growing in the world. The company recently announced that a leading Voice over Internet Protocol (VoIP) operator purchased its Next Generation Networks Service Assurance solution. The VoIP operator boasts a few million subscribers and will use Radcom’s solution to monitor customer experiences on its networks. The stock is up against a 52-week high, but has potential to move even higher.


For more small cap stocks to buy, follow this link.


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