Usually, when the overall economy is in turmoil, small-cap stocks get slammed harder than large-caps. But not this year. For the year-to-date, as of October 7, the Russell 2000 index of small-cap stocks was down 26.3% compared with a drop of 32.2% for the S&P 500 index of large caps. Fund manager Gregory R. Greene says that some of the big culprits for the drop in the S&P 500 are blue chip financials. Small financial stocks have not suffered nearly as much because they avoided massively leveraged balance sheets.
Greene’s investment firm, which manages more than $2 billion in assets, looks for high quality small-caps that are currently undervalued. Recent picks include…
Jack in the Box, Inc. (JBX). The stock of this fast-foot chain is currently much cheaper than McDonald’s or Wendy’s, based on price/earnings (P/E) ratios. The company has strengthened its brand with store renovations and better menu items. It will also become more profitable as it sells off more of its stores to franchisees. Recent price: $19.63.
Hanesbrands, Inc. (HBI). This company specializes in underwear with such brands as Hanes, Playtex, Bali and Champion. Even in hard times, people buy these products. The company will be moving more of its manufacturing overseas, which will boost its profits. Recent price: $18.59.
Chiquita Brands International, Inc. (CQB). After declaring bankruptcy a few years ago, Chiquita has made positive steps in restructuring and increasing its product line beyond bananas. Now, about 50% of its business is in bagged salads. Recent price: $13.40.
