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Gad: Small-Caps With Big Futures

Calavo Growers (CVGW - Get Report) is a $400 million supplier of avocados and other fresh produce products. The demand for avocados and fresh, ready-to-eat produce looks very healthy in the U.S.

Avocados are found in many of today's favorite foods from budget-friendly Mexican restaurants to high-end sushi restaurants. Chipotle Mexican Grill (NYSE), one of the fastest-growing restaurant concepts in the U.S., markets that its restaurants use around 70 avocados to make one batch of guacamole, with many restaurants having to make multiple batches per day.

Earlier this month, Calavo announced that it had completed the expansion of its Mexican avocado packing operations. The expansion will enable the facility to pack up to 6 million pounds of fruit per week, an output increase of 200%.

On paper, the stock is not cheap, changing hands at 33x, but the company has a fundamentally strong business with enormous growth from its current base. Catch this stock on a selloff, and it will be worth holding. Currently trading at $26, management articulates a plan for the stock to trade at $50 in the next couple of years. I would be eager to invest if I could harvest shares around $20.

I've always said that successful investing requires an assessment of both quantitative and qualitative aspects. That belief is even more profound when you are trying to find a small-cap with a big future.
At the time of publication, Gad had no positions in the stocks mentioned, although positions may change at any time.

Sham Gad is the managing partner of Gad Capital Management, a value-focused investment firm based in Athens, Ga. Gad has written extensively for The Motley Fool and was a securities analyst for UAS Asset Management, a small value investment fund in New York City, in 2007. From 2002-2005, Gad managed assets for the Gad Investment Group.

Additionally, Gad has just released a new book, The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett. He earned his BBA and MBA at the University of Georgia. Gad appreciates your feedback; click here to send him an email.

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