Sep 3, 2010 9:02 AM PDT
Odds are good you've never heard of at least one of the three stocks you're about to explore today.... maybe more than one. That's good though. Indeed, that's the whole point of small caps - to find opportunities before they're discovered. In any case, here's the what and why behind the new 'buys' we have on BCPC, MCHP, and TEG.
While it hasn't been completely immune to the market's ups and downs over the last few years, Balchem Corporation (NASDAQ:BCPC) has been considerably shielded from them - enough so that it's in a position once again to make another bullish leg. We got a new technical buy signal this week (blue arrow), largely fueled by persistently-bullish volume.
On the fundamental side, the sustained uptrend from BCPC makes sense. While the forward-looking P/E of 20.6 isn't going to knock anybody's socks off, this small cap name has also topped estimates in three of its last four quarters. Even without more earnings beats though, Balchem Corporation is posting a reliable $0.24 per share now, regardless of the environment. Lots of upside, minimal downside. 
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The April/July pullback from Integrys Energy Group, Inc. (NYSE:TEG) may actually have been the best thing that could have happened to this small cap stock - it cooled off an overheating uptrend. Notice, however, where the downtrend ended and TEG bounced.... right at the 200-day moving average line (green). The bounce off of it in the meantime (and solid follow-through) is a textbook-perfect revival of a long-term uptrend. Thus, we got our [renewed it, actually] long-term buy signal today, but without the baggage of a lot of overbought pressures.
On the fundamental side of the fence, this gas utility name may not look like anything to get excited about. Take a closer look at the quarterly numbers though. Integrys Energy Group has been hitting or topping EPS estimates over the last twelve months, meaning the forward-looking P/E of 14.0 should be no problem. Those numbers may get even easier with the deepwater drilling moratorium coming into play. Add in a solid dividend yield of 5.9%, and the pot is just too sweet to pass up.
After a few months of consolidation (yellow), it's not surprising to see Microchip Technology Inc. (NASDAQ:MCHP) finally perk up and test bullish waters. The official buy signal came today, though given all the support MCHP had been finding around the 200-day moving average line (green) over the last few weeks - albeit volatile support - the bulls had to be brewing something for quite some time. Better still, there's a ton of upside left to go before this chart runs back into a headwind again.
As for corporate numbers, Microchip Technology has topped earnings estimates in each of the last four quarters. As such, the projected (2011) P/E of 13.3 may underestimate the actual potential this semiconductor manufacturer is packing. We already heard from Novellus today that demand hasn't died down, and that sustained demand is on the near and distant horizon. This stock is right in that mix as well. 
About this trading system: Though the details of our stock-scanning are proprietary, we can say that they combine technical and fundamental factors; the technical (chart) aspects are back-tested and optimized for maximum profit. The aim is to find companies with proven expectation-beating fundamentals as well as budding momentum from its shares.
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