WATCH: The 4 Stage Stock Market Cycle

Articles

Micro-Cap Monday - This Undervalued Micro Takes Care of Our Vets

By Bill Spencer September 19, 2022 Facebook Logo Twitter Logo Email Logo LinkedIn Logo

.

Good morning, and happy "Talk Like a Pirate Day."

Today's mighty micro-cap is a member of the Business Products Services sector. And as such, it is far, far removed from anything you could call "swashbuckling."

No matter. Although this $188 million firm is hardly glamorous, it could still return +79.5% in the short to intermediate term.

We'll dive into that in a moment. But first I wanted to say Thank You to everyone who emailed to say they enjoyed last week's "book review" column ("This Glorious Best-Seller (Finally) Explains the Fed").

A few folks also wanted to know what other books about money, or about the Fed, that I recommend. At the end of today's conversation I'll add four titles I think everyone should read.

First... the market.

It was another volatile week in a volatile year. All five major averages finished the week in the red.

(Click any image to enlarge)

The Nasdaq Composite got it the worst, losing -5.48% on the week. The S&P600 (our small-cap proxy) did "best" by declining -4.08%. All the other indices declined more than four percent.

As I mentioned, today's micro-cap is part of the Business Products Services sector. The sector is ranked #24 out of the 45 sectors we monitor at True Market Insiders. Not terrific, to be sure.

But this is an industry group that spends much of its time somewhere in the middle of the rankings. What's more, late last year the sector was hanging out near the very bottom. You can see that highlighted in red in the image above.

It looks as though this autumn the sector will perform better than it did this time last year.

The stock I want you to know about is DLH Holdings Corp. (DLHC). The company provides a range of human services and solutions. Things like data collection and management, and nutritional and social health assessments.

It's primary "customer" is the federal health services market.

DLH Holdings also offers healthcare and other services to the VA, the Defense Health Agency, the Navy Bureau of Medicine and Surgery, and the Army Medical Research and Material Command.

Here's DLHC on the Position Key, one of the premium tools that comes bundled with Sector Prophets Pro, our sector research and data platform. You can see that it's "all blue."

The sector itself is showing strength over the short term (The first blue arrow). The second and third arrows mean, respectively, that the stock is outperforming its sector peers, and that the stock is outperforming the wider market.

The company consistently grows both its earnings and its revenue. Over the 12 months revenues have grown at an average quarterly rate of +69.5%. Earnings per share have grown on average 43.25%.

DLH has also been growing revenue from year to year.

And the company has consistently beaten earnings expectations.

If you've been reading True Market Insider for any length of time, you know we love to see the giant institutions get behind a stock. Over the past four quarters the big funds have accumulated (purchased) 1.75x more of the stock than they've distributed (sold) -- $10.85 million versus $6.21 million.

What's more, the number of funds participating is growing as well. It went from 40 a year ago to 55 today -- a +37.5% increase.

Here's a one-year price chart of DLHC. Those two black dotted lines show the horizontal change the stock has traded inside of since it made a 52-week high ($21.49) on December 30, 2021.

On Friday, the stock's intraday low poked below that support level, but it closed above it. Also, the most recent declines have come on light volume. When the stock moves higher, it tends to do so on heavier-than-average volume (the green arrows).

The top of the channel is around $20. If DLHC reverses, that's our first profit target. A move to $20 represents a gain of almost +38%.

If it gets back to its December high, we'll see a return of +48%.

Here's that same price chart with Fibonacci retracements added at the right.

The yellow highlighted line is at the December high. The retracement above that is at $26.05. If the stock breaks out of its channel and reaches that level, we'll see a return of +79.5%.

Now, as promised, here are four books about money I think you would enjoy and learn from.

  1. The Vandal's Crown: How Rebel Currency Traders Overthrew the World's Central Banks by Gregory Millman. This is an amazing story. A group of quants seizes arbitrage opportunities and (for a while) makes central banks almost irrelevant.
  2. Money: Whence It Came, Where It Went by John Kenneth Galbraith. Galbraith is the best writer on money and economics. And this book is the single-best history of money you're likely to read.

  3. Layered Money - From Gold and Dollars to Bitcoin and Central Bank Digital Currencies by Nik Bhatia. Chris Rowe recommended this book to me, and now I'm recommending it to you. Here, Bhatia traces the evolution of money and cryptocurrencies. After you finish this book you'll know more about bitcoin than anyone you know.

  4. Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider. This is a gigantic book in every sense of the word. It was published in 1989, when memories of Paul Volker's heroic (or draconian, depending on your ideology) campaign to kill the roaring inflation of the early 1980s.

Thanks for stopping by!

Bill Spencer

Editor-in-Chief, True Market Insiders

 

 

FREE e-Letter
Sign Up

Archives