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An ignored stock has become a tremendous opportunity, portfolio manager says

In a market where investors aren't focused on earnings, opportunity can be found in companies that can grow regardless of the macro backdrop, portfolio manager Stephen DeNichilo said Tuesday.

A perfect example is the often-ignored specialty chemical company Kraton Performance Polymers, up 90 percent year to date, he told CNBC's "Power Lunch."

In fact, he thinks the stock can still double from here.

"They have the highest margins in the sector and the lowest valuation," said DeNichilo, who manages $9 billion as portfolio manager at Federated Kaufmann Funds.

Traders work on the floor of the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images
Traders work on the floor of the New York Stock Exchange.

He said the company has been easy to ignore, given that it has had a lot of drama over the last few years — including a failed merger, high capital expenditures, oil volatility and the purchase of another company that doubled its size.

However, the company said it sees $100 million in cost and sales synergies over the next two years and an incremental $500 million in free cash flow, DeNichilo pointed out.

"I've never seen in my career a company where the management is jumping up and down saying that they have cost synergies out there and the Street is not recognizing it," he said.

Shares of the small-cap company popped after DeNichilo's comments and were up about 6 percent in afternoon trading.

CNBC's Hailey Lee contributed to this report.

Disclosures: Federated Kaufmann Funds owns KRA.

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