Pros: Smaller Companies to Generate Bigger Returns?
As you may know the Dow looks like it will end the year up about 11%. Not too shabby – unless you compare that to the performance of small and mid-size companies.
By comparison, the Russell 2000, an index which tracks smaller companies, will likely end the year over 25% higher.
In fact, small and mid caps have outperformed their blue chip brethren for the last 10 years running and the Fast Money desk sees no reason for that trend to reverse itself in 2011.
Of course you can always trade a bullish outlook on small caps with the IWM – the ETF that tracks the Russell 2000. But if you’re more of a higher risk / higher reward kind of investor you probably want single stock stories.
For those insights we turned to Lance Helfert, West Coast Asset Management president. Following are his favorite smaller and mid-cap plays:
1. Broadridge Financial (BR)
Even though Broadridge is not a household name, the company has a dominant position in the investor communications niche, Helfert tells us. In fact, in fiscal year 2010 the company processed approximately 66% of the outstanding shares in the U.S. in the performance of proxy services.
In addition, the company has a very stable and sustainable business model that might make it an ideal private equity takeout candidate. The company boasts a strong balance sheet and trades at only 12 times free cash flow with a dividend yield of 2.80%.
(As you might remember Broadridge was a recent Hedge Fund Trade of the week. Click here and check out what Anthony Scaramucci had to say about this company.)
Molson Coors (TAP)
In recent years there has been a lot of consolidation in the global alcoholic beverages industry, Helfert says. The largest example was Inbev’s purchase of Anheuser-Busch.
Given all of the activity, it is not hard to imagine an acquirer being interested in controlling Molson Coors’ portfolio of beers. Specifically, the world class beers under the Molson Coors umbrella include names such as Coors Light, Miller Genuine Draft, and Carling.
And, he adds, it is hard to believe that the company is trading at only 12x earnings.
Live Nation Entertainment (LYV)
Live Nation is the largest entertainment company in the world, connecting millions of fans to thousands of events all over the globe, Helfert explains.
Early this year, the company merged with Ticketmaster, which is the largest live event ticketing company in the world. The combined entity now has a dominant position in the growing North American concert ticket market.
The company now has a near monopoly position in a growing market with very little opportunity for competitors to steal away market share. Furthermore, the largest shareholder of the company is Liberty Media Corporation, the John Malone-led company that holds more than 18% of the total shares.
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Trader disclosure: On December 29, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Cortes is long U.S. Treasuries; Cortes is short (XRT) vs. (SPY); Cortes owns (TSN); Cortes is short (XHB) vs. S&P futures; Jon Najarian owns (AAPL), is short (AAPL) calls; Jon Najarian owns (AGU), is short (AGU) calls; Jon Najarian owns (BBT), is short (BBT) calls; Jon Najarian owns (BBY), is short (BBY) calls; Jon Najarian owns (BJ), is short (BJ) calls; Jon Najarian owns (BTU), is short (BTU) calls; Jon Najarian owns (CSCO), is short (CSCO) calls; Jon Najarian owns (GS), is short (GS) calls; Jon Najarian owns (MCP), is short (MCP) calls; Jon Najarian owns (NFLX), is short (NFLX) calls; Jon Najarian owns (NKE), is short (NKE) calls; Jon Najarian owns (REE), is short (REE) calls; Jon Najarian owns (SWN); Pete Najarian owns (BBY) calls; Pete Najarian owns (C); Pete Najarian owns (F) bonds; Pete Najarian owns (GE); Pete Najarian owns (MS); Pete Najarian owns (NKE) call spreads; Pete Najarian owns (PFE); Pete Najarian owns (RSX); Pete Najarian owns (YHOO); Pete Najarian owns (MSFT) call spreads; Gordon is long U.S. Treasuries; Weiss owns (FAS), (NIHD), (VZ), (QCOM), (BJS), (MEE), (COP), (DVN), (HK); Weiss owns (NFLX) puts
Funds Managed by Dennis Gartman Are Short the Euro
Helfert And West Coast Asset Management Own (BR), (TAP), (LYV)
Riedel has no disclosures
Arends has no disclosures
PETE NAJARIAN SOT
Pete Najarian owned (RSX) on 12/28/2010
STEVE CORTES SOT
Cortes was short
Oil on 11/01/2010
Cantor Fitzgerald & Co. has no disclosure in (BTU)
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