"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.
As technology and financial stocks hog the spotlight, other sectors are on sale. Since March, the Nasdaq has gained 41% and the Russell 1000 Financial Services Index has surged 81%. The S&P 400 Specialty Chemicals Index falls between those two. The following small-cap specialty-chemicals stocks offer compelling stories, fundamentals and value.
NewMarket Corp. (NEU - Get Report), based in Richmond, Virginia, develops chemical additives that enhance the performance of petroleum products and make fuels burn cleaner, engines run smoother and machines last longer. It's a decent pitch, right? As the government clamps down on fuel emission standards, and oil and car companies shift their focus toward so-called clean energy, this company is an obvious winner. TheStreet.com Ratings upgraded NewMarket to "buy" less than a month ago.The company's heritage dates to 1887 as a paper-manufacturing company. In 1921, a partner firm discovered that a certain combination of chemicals added to gasoline could reduce engine "knock." A joint venture between General Motors (GMGMQ) and Standard Oil, now known as Chevron (CVX - Get Report), was created two years later. NewMarket's first-quarter sales fell 12% to $337 million, but earnings per share climbed 48% as its operating margin almost doubled. The company has a strong financial position, as reflected by a $59 million cash balance. NewMarket's stock is trading at a discount in the specialty chemicals industry on the basis of earnings, sales, book value and cash flow. With a price-to-earnings ratio of 14.1, NewMarket is 29% cheaper than its average peer. The stock has doubled this year. Milwaukee, Wisconsin-based Sensient Technologies (SXT - Get Report) manufactures and markets colors, flavors and fragrances. During a tumultuous 2008 for most companies, Sensient managed to improve earnings per share in all four quarters on a year-over-year basis. It has extended its strong performance into 2009, boosting EPS by 5% even as revenue fell 8% to $283 million in the first quarter. The company has an adequate liquidity position, as reflected by $8 million of cash.