In a discussion with CNBC’s Scott Wapner, Eric Marshall, from Hodges Mutual Funds, spoke about small cap stocks and opportunities that can be found in that space. He also commented on stocks like KapStone Paper and Packaging Corp. (NYSE:KS) and Bonanza Creek Energy Inc (NYSE:BCEI).
“I think that, you know, small cap stocks do tend to be a little bit more volatile. Whenever you do get a selloff in the market, they tend to react more to the downside just as they react more to the upside in a bull market.”
He added that small caps have taken a kind of rest this year as the rest of the market played catchup over the last two years. According to Marshall, there are always pockets of opportunities and secular growth opportunities that can be found in the small cap space, and he said that these opportunities can be found in just about any market i.e. a bull market of a bear market.
On the stock of KapStone Paper and Packaging Corp. (NYSE:KS), Marshall said: “This is a small cap company that’s involved in corrugated cardboard, and they basically make cardboard boxes and so forth. This is an area that is dominated by a lot of large players. The industry has consolidated. They were the smaller players out there. They positioned themselves as a low-cost provider, and they’re able to raise prices.”
He added, with pricing power there is a benefit of margin expansion and better earnings and that the KapStone Paper and Packaging Corp. (NYSE:KS) stock trades at 12 times earnings.
On the topic of investing in the stock of oil and gas company Bonanza Creek Energy Inc (NYSE:BCEI), Marshall said: “Yes, these guys (Bonanza Creek Energy Inc (NYSE:BCEI)) are in the, you know, Northern Colorado mid-continent. We like the production growth that they have here, and we like the earnings improvement over the next two years and think that, that will really drive further improvement in the stock price.”