NEW YORK (TheStreet) -- Small-cap equities are pricey now that they've soared, but there are still plenty of reasonably priced growth stocks, says Ford Draper, manager of the Kalmar Growth-With-Value Small Cap Fund (KGSCX). Draper favors Gentex (GNTX), Albemarle (ALB) and Elizabeth Arden (RDEN).
The $376 million mutual fund has returned 37% over the past year, according to Morningstar (MORN). During the past five years, the fund has risen an average of 6% annually, putting it in Morningstar's 34th percentile for small-cap growth funds.
Welcome to TheStreet's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.
Why is rear view mirror-maker Gentex a good play on the auto-industry recovery?Draper: Simply speaking, Gentex is the most profitable of any of the world's auto-parts suppliers. They have better mirrors with more features. They are penetrating new models. They are introducing new products like rear-camera displays. The company presently trades at a 20% lower multiple than usual, and it has the best new product slate in its history. Why is now a good time to be in Albemarle and the bromine business? Draper: You want to be in Albemarle for the bromine business and also for their refinery catalyst exposure. Both of these are oligopolistic industries. They have pricing power in both of them. They are gaining share and growing like crazy and the stock still trades at a modest multiple. Elizabeth Arden has had some problems over the past decade. Why do you think they are on the right track now? Draper: They are under new management for the past two years. They have tightened things up from soup to nuts. They have raised their operating margins and they are penetrating Europe where they are very little exposed but have a great brand recognition. Of all the business software providers you can choose, why do you like Ariba (ARBA)? Draper: Any company whose software can deliver industrial companies more efficient purchasing power and reduce your working-capital needs is a business you want to own. And this company is gaining significant share in that market. Ariba is raising operating margins, and they have a long runway ahead of it. Why should I find the floor-cleaning business, and the Tennant Co. (TNC), in particular, sexy to invest in? Draper: That's a darned good question and actually one of the reasons this stock is reasonably valued at the moment. This was a stodgy company. They are the leader in industrial-floor cleaning. They are rapidly penetrating the commercial floor-cleaning business, which is possibly three times as big because they have a new technology that allows them to clean the floor of a supermarket or drugstore with electrolyzed water. That saves all sorts of money and prevents the store owner from using noxious chemicals that they don't want to be associated with. -- Reported by Gregg Greenberg in New York. Readers Also Like: >> 4 Overlooked Agriculture Stocks >> 10 Androids That Outmuscle the iPhone
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV