Shares of Matrix Service (MTRX) have declined over 8% so far this year because investors are tying the construction and maintenance company to the troubled energy sector. But Jay Kaplan, portfolio manager for the Royce Small-Cap Value Fund (RVVHX) , said Matrix is not tightly correlated to the oil drillers and will bounce back once investors better understand that.
"The Street really thinks it is just an oil and gas drilling company, so they trade it like an oil stock, but it is much more than that," said Kaplan. "We think that when people see through that, or if energy prices go up, you won't have a 10 multiple anymore."
Kaplan is also bullish on Moelis (MC) , which is down 10% thus far in 2016. He said the boutique investment advisor may be seeing a slowdown in its M&A business, but it is seeing a big pickup in its turnaround division.
"As things get tough and we see bankruptcies, like we are already seeing in the energy sector, the restructuring business could pick up," said Kaplan, adding investors get a really big yield of 4.8% for owning the stock as well.
DSW (DSW) is down 8% year to date. However, Kaplan is a fan of the shoe-seller's stock even though a number of Wall Street analysts downgraded the shares last week because of depressed sales and a drop in margins due to large clearance sales.
"One of these days, there will be a hot shoe again," said Kaplan. "Santa Claus will come back and they will have a good Christmas again. And there is lots of insider buying with more than a 3% yield."
Finally, Kaplan is a fan of MYR (MYRG) , which is up 20% so far this year. The company provides electrical construction services primarily to the electric utility industry. Profitability at the company has come down in recent years as fewer large projects have commenced construction. Nevertheless, Kaplan said a turnaround is at hand and MYR will benefit.
"It looks like the grid is going to continue to get rebuilt and there will be a lot of activity," said Kaplan. "And now we have some shareholder activists circling around who don't like the fact that there is a lot of equipment around and the company is underleveraged."