Eight of 10 'Radar' Small-Caps Post Gains

BOSTON (TheStreet) -- The Under the Radar Portfolio of TheStreet's 10 favorite small-cap stocks has returned 23% since their original recommendations. Seven have delivered double-digit percentage gains in the first quarter.

Generic drugmaker Perrigo(PRGO) has soared 44% since we recommended it on Jan. 25.

Snack food specialist Diamond Foods(DMND) has surged 39% since TheStreet's pick on Oct. 28.

High-tech component maker Spectrum Control(SPEC) has returned 37% since our Feb. 4 article.

Bucyrus(BUCY), Carbo Ceramics(CRR) and Conseco(CNO) have all risen more than 20% since our picks.

Touch-screen maker Synaptics(SYNA) has gained 11%, but has been dogged by sell-side downgrades recently.

Einstein Noah Restaurant Group(BAGL) has risen 4.2%.

Once a portfolio leader, Telestone Technologies(TSTC) has plummeted 18% during the past month, bringing its gain to 4.6%. Investors are awaiting fourth-quarter results.

China North East Petroleum(NEP) has fallen out of favor since we recommended it. The stock is down 2%, thought it has rebounded in the past week. On Wednesday, the shares popped 7.4%. Management was forced to revise its 2008 and 2009 financial statements to account for non-cash accounting adjustments. Investors had enjoyed a gain of 563% over the past year.

China North remains a fundamentally attractive investment and we are sticking with the stock. The company's recently purchased oilfield-services subsidiary Song Yuan Tiancheng Drilling Engineering just signed a contract with PetroChina(PTR) to drill 30 wells, its second large new contract of 2010. Furthermore, with China's economy demonstrating resilience and crude oil hitting a 17-month high this week, China North is a solid bet.

China North's low-cost drilling strategy translates to a net margin consistently between 30% and 40%. Its third-quarter net spread hit 33%, beating those of Exxon Mobil(XOM), Chevron(CVX) and ConocoPhillips(COP). In addition, its balance sheet and valuation are far superior to U.S. large-cap peers. China North holds $33 million of cash and $12 million of debt, translating to a quick ratio of 1.4 and a debt-to-equity ratio of 0.2.

With a market value of $234 million, China North hasn't attracted a large Wall Street following, so its shares are still undervalued. It trades at a price-to-projected-earnings ratio of 7.2 and a price-to-cash-flow ratio of 6.6, 50% and 32% discounts to peer-group averages. It's also cheap based on trailing earnings and book value. Rodman & Renshaw(RODM), which rates China North "buy," expects the stock to advance 13% to $11.