The Small-Cap King’s 5 Best Stock Picks Include The Buckle, Inc. (BKE) and Teradyne, Inc. (TER)

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Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is the hedge fund manager’s fourth largest small-cap holding, and is a stock that’s already up more than 9% since the start of the New Year. Lincoln Electric is primarily focused on arc welding products, and the 100+ year-old company is also exciting investors in the automated welding space. The company has seen its earnings grow by an average of nearly 5% a year over the past half-decade, but the Street expects this growth to double over the next five years.

Strong positioning in a continually consolidating industry is a key reason behind analysts’ bullishness, and a projected dividend yield of 1.5% isn’t too shabby either. Shares of Lincoln Electric do trade at industry-average valuation metrics no matter how you slice it, but a market-leader with accelerating growth makes the stock a good addition to most investors’ portfolios.

Last but certainly not least, we have Reliance Steel & Aluminum (NYSE:RS), Royce’s fifth largest small-cap stock pick. Reliance has provided investors with a return (16.2%) nearly thrice that of the metal fabrication industry’s average over the past 12 months, and has also performed quite impressively over the shorter term. The company has beaten the sell-side’s earnings consensus in each of the past five quarters, despite a less-than-stellar economic environment for steel-related companies.

In comparison to its peers, Reliance’s main advantage lies in its commitment to consistent dividend payouts, willingness to engage in M&A expansion—particularly in oil and gas—and its below-average cost structure. At a mere 11 times forward earnings and 0.5 times sales, Reliance offers investors a great way to play a steel rebound, which likely explains Royce’s bullishness. Joining the hedge fund manager in this company is Cliff Asness and David Dreman, among others (see David Dreman’s favorite stock picks).

For more related coverage, continue reading here at Insider Monkey:

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Why Does This Hedge Fund Manager Own Reliance Steel & Aluminum?

Disclosure: I hold no positions in any of the stocks mentioned above

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