3 Small-Cap Stocks With 30% Upside Potential by Year-End
Stocks are enjoying a strong year. For example, if you were long the S&P 500 since the first trading day of 2012, you’d be sitting on a gain of about 14%. That’s far better than the historical norms, and though the path has been volatile, your patience would have been rewarded. The tale is similar if you bought stocks in the Dow Jones Industrial Average, which is up about 9% so far this year.
Of course, if you went smaller and concentrated on stocks in the small-cap Russell 2000 Index, then your gains were even better. This segment of the market is up about 16% year to date.
Hey, I think these gains are great, and if you have enjoyed them, then I applaud you. But when it comes to gains, there are individual small-cap stocks that make the major indexes look like they’re running in place.
To find out which small-cap stocks were leading the pack through the first nine months of the year, I ran a Bloomberg screen for the best-performing stocks in the Russell 2000 Index year to date. The screen showed some serious winners, with the top three performers posting gains of 670%, 460% and 405% so far in 2012.
These types of gains aren’t very common, but when you’re trading small caps, you’re not looking for common — you’re looking for blockbusters. Of course, past performance here doesn’t guarantee future results, and not all small caps are alike.
Here are three of my favorite triple-digit small-cap winners that could still make you serious profits in 2012.
1. Xoma Corp. (NASDAQ: XOMA)
Shares of Xoma Corp. are up more than 200% since the beginning of the year, and like many of the top-performing small caps in 2012, the stock is in the biotech sector. Xoma is currently developing a host of antibody-based drug therapies, but most of its products are still in the clinical trial phase.
The company’s drug gevokizumab is one of the therapies capturing attention. It was recently awarded “orphan drug” status for the treatment of a condition called uveitis, which basically is a swelling in the eye. The Food and Drug Administration’s designation puts the company’s drug on track to come to market soon, and that’s caused this stock to look very good in the swelling eyes of traders.
Action to Take –> Buy XOMA at the market price. Set initial stop-loss at $3.41 and set initial price target at $4.93 for a potential 30% gain by year-end.
2. Patrick Industries (NASDAQ: PATK)
Housing is making a comeback, and one segment of the housing market making a very strong comeback is mobile homes. One company providing building materials and supplies to this market is Patrick Industries. The parts and products distributor also supplies the RV industry with materials needed to make those traveling dream homes.
Traders have supplied the stocks with a 228% gain in 2012, and one big reason is the company’s recent earnings report. In fiscal second quarter, Patrick Industries reported earnings per share of $1.22, which not only beat estimates, but beat earnings for all of 2011 and all of 2010.
Action to Take –> Buy PATK at the market price. Set initial stop-loss at $12.65 and set initial price target at $18.28 for a potential 30% gain by year-end.
3. Threshold Pharmaceuticals (NASDAQ: THLD)
Another biotech firm lighting up the small-cap performance chart so far this year is Threshold Pharmaceuticals. The optimism for the makers of blood cancers treatments for ailments such as leukemia has helped the stock soar 409% year to date, which gives me hope that the market thinks this company’s products can help so many afflicted with blood cancers.
Right now, there’s a scarcity of treatments for these conditions, but if a company can develop a successful treatment, then the long-term result in terms of the share price performance would make this year’s gains look trivial.
Action to Take –> Buy THLD at the market price. Set initial stop-loss at $6.30 and set initial price target at $9.10 for a potential 30% gain by year-end.
This article originally appeared on TradingAuthority.com: