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Small-Cap Companies That Beat Stock Market

Small-cap stocks Benchmark Electronics, Community Trust Bancorp and Nortel Inversora were upgraded to 'buy' at TheStreet.
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BOSTON (TheStreet) -- These small-cap stocks were upgraded by TheStreet's equity model. Each has a small Wall Street following and has outperformed the U.S. stock market in 2010.


The model upgraded manufacturer and service provider

Benchmark Electronics

(BHE) - Get Benchmark Electronics, Inc. Report

to "buy." Benchmark has appreciated 12% in 2010.


: Benchmark swung to a fourth-quarter profit of $17 million, or 26 cents a share, from a loss of $204 million, or $3.13, a year earlier. Revenue ascended 3.2% to $600 million. The operating margin inched up from 3.1% to 3.5%. Benchmark holds $421 million of cash and $12 million of debt.


: Benchmark has soared 66% during the past year. The stock trades at a price-to-projected-earnings ratio of 15, a price-to-book ratio of 1.3 and a price-to-sales ratio of 0.7, 29%, 46% and 72% discounts to peer-group averages. It's also cheap based on sales per share.


: No sell-side analysts cover Benchmark, which has a market value of $1.4 billion. During the fourth quarter, five of its 10 largest shareholders, including

Bank of America

(BAC) - Get Bank of America Corp Report

, decreased their holdings, while four, including

State Street

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TheStreet Recommends

(STT) - Get State Street Corporation Report

, amplified their bets. One top holder retained the size of its position.


The model upgraded

Community Trust Bancorp

(CTBI) - Get Community Trust Bancorp, Inc. Report

, focused on Kentucky and West Virginia, to "buy." Community Trust Bancorp has rallied 20% in 2010.


: Fourth-quarter profit expanded 7.3% to $7 million, or 46 cents, as revenue climbed 4.9%. The operating margin extended from 30% to 38%. Community Trust Bancorp holds $142 million of cash and $275 million of debt, translating to a debt-to-equity ratio of 0.9.


: Community Trust has declined 0.2% during the past year, underperforming benchmarks. It sells for a price-to-projected-earnings ratio of 15 and a price-to-cash-flow ratio of 12, 19% and 18% discounts to peer-group averages. It's fairly valued based on book value.


: Of analysts covering Community Trust, two advise purchasing its shares and two recommend holding them.

Sandler O'Neill

expects the stock to advance 6% to $31.

Hilliard Lyons

believes it was fully valued at $28. The stock pays a 4.1% dividend yield.


The model upgraded

Nortel Inversora


, a telecommunications company in Argentina and Paraguay, to "buy." Nortel Inversora has soared 43% in 2010.


: Nortel Inversora posted a fourth-quarter profit of $57 million, or 33 cents a share, compared with $5.5 million, or 1 cent, a year earlier. Revenue soared 56%. The full-year 2009 operating margin stretched from 19% to 23%. Nortel Inversora has $335 million of cash and $216 million of debt.


: Nortel Inversora has more than quintupled during the past year, trouncing major benchmarks. The stock trades at a price-to-sales ratio of 0.7, a 41% discount to the industry average. It's fairly valued based on trailing earnings and expensive when considering book value per share.


: No sell-side firms cover Nortel Inversora, but eight of the company's 10 largest shareholders increased their bets during the fourth quarter and two retained their positions.


(JPM) - Get JPMorgan Chase & Co. Report

owns 12% of the company and

Renaissance Technologies

, a quantitative hedge fund, owns 1.5%.

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-- Reported by Jake Lynch in Boston.