Under-the-Radar Financial Stocks for Today

"Under-the-Radar Stocks" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

Boutique is the new bulge.

JPMorgan(JPM), Goldman Sachs(GS), Wells Fargo(WFC) and Bank of America(BAC) probably will be restrained by new regulations cracking down on everything from securities risk to bankers' pay.

Knight Capital(NITE) and Stifel Financial(SF), on the other hand, are benefiting from wider trading spreads and a surge in trading revenue. The capital-markets companies are rated "buy" from TheStreet.com Ratings.

Business is booming, as the stock market came to life almost three months ago. Institutional investors are still sitting on trillions of dollars, foreshadowing a trickle that will turn into a flood. And, yet, Knight Capital and Stifel Financial remain undervalued. The Russell 1000 Financial Services Index has surged 78% from its March 6 low, and these two sleepers are waiting for their own rally.

Jersey City, N.J.-based Knight Capital is in the business of market-making. Last year, it was the largest U.S. trader in so-called pink sheets and OTC Bulletin Board securities, home to smaller companies. As investors anticipated earnings reports from the biggest banks, such as Citigroup(C) and Bank of America, Knight Capital posted an impressive first quarter, increasing revenue 27% to $245 million. Earnings per share declined 13% to 35 cents, hurt by the divestiture of an asset-management division. Daily trading volume and total trades rose in March, April and May from a year earlier.

Knight Capital's focus on low-priced stocks is ideal, given that even behemoths like General Electric(GE) and General Motors(GM) have traded in the single digits. Knight Capital is trading at a price-to-earnings ratio of 8.7, making it 64% cheaper than its average peer in the investment banking and brokerage industry. The shares are also cheap on the basis of sales, book value and cash flow. The stock has risen 6% this year.