Four Small-Cap Value Stocks Rallying Into 2017

Four small cap stars set to shine in 2017: AAR, Sensient, Landec and LTC.
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AAR Corp. (AIR) - Get Report is up 24% thus far in 2016 and increasing traffic could send the airline and airport supplier's shares even higher, said Steve Raineri, portfolio manager for the Franklin Small Cap Value Fund (FRVLX) - Get Report .

"AAR is seeing increased demand from airlines, plus they recently received a huge contract win from the State Department," said Raineri.

The Franklin Small Cap Value Fund is up 13.3% thus far in 2016, according to Morningstar. The $2.6 billion fund has returned an average of 11.4% annually over the past five years, outpacing 65% of its rivals in Morningstar's small-value category. The fund sports a trailing 12 month yield of 51 basis points, according to Morningstar.

Sensient Technologies (SXT) - Get Report , up 19% year to date, is another one of Raineri's top picks. The flavors and fragrances specialist is seeing a boom in business as major food players seek to go more natural.

He is also bullish on Landec (LNDC) - Get Report , up 10% in 2016, saying the ready-to-eat salad supplier has a number of different business lines that could see serious growth down the road.

Finally, Raineri is a fan of LTC Properties (LTC) - Get Report , up 8% year to date, saying the health care-based REIT is a contrarian pick considering rates are on the rise and health care is being pressured by politics.

"LTC has positive demographic trends with the aging population and they are also attractive because they are a triple-net lease operator," said Raineri.