Remember when you were a kid, and Mom might bake a sheet of brownies when your sister came home with straight A's? What would have been awesome would have been to get the straight A's yourself, but the brownies were just as tasty, even when the straight A's belonged to a sibling.
Now, I'm going to take you deep here ... remember when, because the good grades were not yours, you would volunteer to do the dishes in order to deflect any attention that might otherwise come your way? You didn't scrape that baking sheet into the trash, did you? You scraped it into a plate, or maybe right into your mouth because you knew that the discarded, unnoticed crumbs sometimes taste the best. Sometimes they were burned. You never knew. Call it speculative tasting.
Now that we are much older, we're not likely to stand next to the trash, scraping a baking sheet for the crumbs. What we can do, in order to find something useful among the discarded, is look for cheap stocks -- well, cheap on a dollar basis anyway -- that actually have a chance to earn money and are able to meet their debt obligations. Right?
These stocks are cheap for a reason. Nobody loves them. Are they worthy of speculative purchase? For the majority of stocks in this position, the easy answer is no. Some, though, will be the baby turtle that makes it to the sea. Some will be swallowed by bigger animals once they get there, but in this case, that's not a bad thing. Let's spin the wheel, and take a look at a few companies with at least a shot.
In my journey, I looked at companies that could sport a market cap of at least $50 million, meaning I am looking at micro-caps, but no nano-caps. I considered only firms that trade at market prices of under five bucks. I wanted to focus on firms that appear to be coming out of a negative P/E-ratio environment that also had forward-looking P/Es above zero, and lastly, I wanted to stick to firms with current ratios of at least one, but less than two-ish, meaning that these firms appear capable of meeting both short- and long-term obligations from a total-assets vs. total-liabilities perspective. Oh ... I failed to mention. I like micro-caps that make the effort to pay a dividend.
Digirad Corp. (DRAD) - Get Report
This firm provides healthcare solutions, offering offers diagnostic imaging services, sales and services related to its solid-state gamma camera imaging systems as well as warranty, and post-warranty services. DRAD trades at $2.75 after losing 19% of its value yesterday. Why did the stock get crushed? DMS Health Technologies, a Digirad subsidiary, disclosed yesterday that its services contract with Philips (PHG) - Get Report, its big client, will end on Dec. 31.
Opportunity? Perhaps. The firm sports a current ratio of 1.3, indicating that by keeping its liabilities well managed, it has already bought themselves some time. Sales were projected to grow almost 3% in 2018 over 2017. The forward-looking P/E had been 12.8, coming out of the negative. Now they have to replace a big client. This is a spec play. Maybe you buy it on this news-related discount, maybe you wait, but the bad news seems to be out. The stock did rally 40 cents off yesterday's lows, and they pay a 22-cents-a-share annual dividend to boot, which is somewhat unusual for such a bottom-feeder. This one has a chance, and may be artificially cheap at the moment.
Black Box Corp. (BBOX) - Get Report
This tech firm designs, builds, manages and secures its clients' information technology infrastructure. The firm offers a wide variety of products and related services that are sold through direct marketers, value-added re-sellers and mass merchandisers. This is another emerging firm, in my view. The stock closed at $3.63 last night and sports a market cap of $55 million. The firm trades at -3 times the past 12 months' earnings, and eight times forward-looking earnings. This firm also boasts a healthy-looking current ratio of 1.6.
BBOX was sawed more than in half after reporting first-quarter earnings in early August. Technically, the stock saw a positive MACD crossover in early September, with that bullishness confirmed by a rising RSI (relative strength index) about two weeks ago. Guess what? These guys pay a 12-cents-a-share quarterly dividend, which at these prices is still a 13% yield. In fact, the more I read about this stock, the more I want to buy it. I fully intend to buy this stock for myself after this article is public for a couple of hours.
Teekay Tankers (TNK) - Get Report
This one bears a monster market cap of over $200 million. Think oil is on the way back? If you do, then maybe you want to look at an affordable marine shipper. TNK is an international provider of maritime transport to the oil industry. The firm's fleet consists of approximately 60 conventional vessels. Within that group are 10 in-chartered vessels, and six ship-to-ship support vessels.
The current price of $1.60 paints the picture of a firm trading at -7 times trailing P/E, and +6 times forward-looking P/E. This firm is expected to show positive EPS for both the final quarter of 2017 and full-year 2018.
Oh, and this one pays a dividend as well, albeit just 3 cents a share per quarter. Spec play for sure, but if you believe in oil...
The catch? The firm sports an almost nasty current ratio of 0.8. I will be slow in acting on this one myself, but it is on my radar.
(This article originally appeared on Friday on Real Money, our premium site for active traders. Click here to get great columns like this from Jim Cramer and other writers even earlier in the trading day.)
At the time of publication, Guilfoyle had no positions in the stocks mentioned.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider DRAD, BBOX and TNK to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.