Market Overview

Low-Priced Small-Caps That Won't Stay That Way


It is no secret that investors love triple-digit stocks. Even if they cannot afford to amass large positions or any positions at all in the likes of Apple (NASDAQ: AAPL) and Mastercard (NYSE: MA), investors still love to talk about and watch these seemingly sexier names.

Many investors also like single-digit stocks because those issues appear cheap and are readily obtainable. Unfortunately, the critical mistake many novices make is being seduced by price alone while failing to realize there are reasons why a stock resides below $10. More often than not, those reasons are bad.

However, there are a few hidden gems with price tags that may not accurately reflect the company's true potential. These small-caps fit the bill:

WisdomTree Investments (NASDAQ: WETF) With a market cap of almost $880 million, WisdomTree is by definition a small-cap stock. In the ETF universe, however, WisdomTree is far from small. The company, which sponsors 48 ETFs, had $14.95 billion in assets under management at the end of June, according to data from the ETF Industry Association. That makes WisdomTree the seventh-largest U.S. ETF sponsor as ranked by AUM.

It is worth noting WisdomTree's market value has increased by more than $50 million in less than three weeks. More importantly, the company is the only pure-play ETF issuer that is publicly traded. That makes the stock perhaps the best way to play what is expected to be soaring growth in the coming years for the ETF business.

Goldman Sachs has a $9 price target on WisdomTree, which implies significant upside from current levels. Goldman Sachs also believes WisdomTree could be a takeover target. Should that situation come to pass, the stock could easily hit the double-digits.

Synergy Pharmaceuticals (NASDAQ: SGYP) Synergy Pharmaceuticals is a micro-cap name and seeing this stock at $10 or more seems a bit far-fetched given that it currently trades below $5. The company is engaged in the development of drugs to treat gastrointestinal (GI) disorders and diseases, an area that is a multi-billion slice of the health care pie.

Synergy is working on a treatment for chronic idiopathic constipation (CIC) and constipation-predominant irritable bowel syndrome (IBS-C). The results of those trials are expected in the fourth quarter. If positive, that could put the treatment on the path to approval and Synergy shares on the path to $10.

ZaZa Energy (NASDAQ: ZAZA) ZaZa currently resides nowhere double-digit territory and it is fair to call this a speculative stock. The upside with ZaZa is clear. In June, the company ended a joint venture in the Eagle Ford Shale with Hess (NYSE: HES).

The end of that agreement means ZaZa's Eagle Ford holdings will jump sixfold to 72,000 acres Reuters reported. That is significant because many industry observers believe Eagle Ford is the next great American onshore oil play.

If ZaZa can boost production and reserves at Eagle Ford, its shares will climb higher. If the company increases production in remarkable fashion, it will be takeover bait for mid- or large-cap oil name.

Posted-In: Analyst Color Long Ideas News Short Ideas Small Cap Analysis Futures Commodities Small Cap Best of Benzinga


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