A Barrel of Tasty Small-Caps

When it comes to stocks that garner the most attention from the media and institutional investors, large- and mega-cap names tend to snag the spotlight as smaller-cap stocks fly under the radar. We believe this results in mispricing -- and it turns out that hedge funds are often successful in finding undervalued companies when they look at small-caps. We have estimated that, among hedge funds, the most popular small-cap stocks have an alpha of about 120 basis points per month. We began testing this theory in our August newsletter, listing the stocks that met this criteria, and our mock portfolio proceeded to return about 20% between early September and mid-January.

We can also turn to the picks of individual funds as free suggestions, and take a quick glance at them before we decide whether they're worthy of further research. As an example, in the most recent 13F SEC filing of billionaire Michael Price's MFP Investors, here are five stocks that (at the time of filing) had market capitalization of between $1 billion and $5 billion....409 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.