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Two Small-Cap Stocks to Trade Considerably Higher in February: XPO Logistics Inc (XPO), Sarepta Therapeutics Inc (SRPT)

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There is something exciting about a small cap stock. Perhaps it’s the unknown, or the potential for large gains, but either way investors are naturally attracted to the prospects of what a small cap stock has to offer. In this article I am looking at two stocks in particular, two of which have the likelihood to trade considerably higher both in February and long-term.

XPO Logistics Inc (NYSE:XPO)A Small Unheard of Company that You’ll Know Soon

Back on October 30, I spoke with the CEO of XPO Logistics Inc (NYSE:XPO), Bradley Jacobs, after his third acquisition, Turbo Logistics, since his tenure began. In 2012, the $300 million company acquired $250 million in revenue, expanded its freight, and entered into a number of new segments. Jacobs, who has built four multi-billion dollar companies throughout his career and has $300 million at his disposal in cash, has continued to make bigger and better acquisitions with each purchase and is poised to report revenue of $500 million in 2013. However, this is assuming that no additional acquisition will occur, which is simply not the case.

In my newly released McGraw-Hill book, I talk in detail about unmeasured fundamentals and their psychological effect on a stock. XPO Logistics is a perfect example of an unmeasured fundamental metric, which is executive impact. So far, Jacobs has stayed true to all of his guidance and has been very methodical by nature. Therefore, when Jacobs said to me back on October 30, “we should close another acquisition sometime in the next four months” investors should take it to heart.

The stock has typically traded higher by 15-20% following acquisitions, and with earnings scheduled for February 27, I’d watch and anticipate a major move in the coming week, maybe sooner. The big upside comes following the acquisition. Up until recently, XPO Logistics has flown somewhat under-the-radar. Yet this is a company in the transportation sector with growth that is second-to-none. And if the current trend continues, then this new acquisition should be larger than the company’s previous acquisitions, as they continue to grow in size.

After the company completes its next acquisition, XPO could have revenue of more than $650 million with a market cap of $300 million. This leads me to my final point, if the company can reach $650 million in revenue with a new acquisition, it would trade with a price/sales of 0.45 (based on current valuation). Have you ever seen a company with 200% sales growth trade with a price/sales of 0.50? The answer is no, and for this reason, and Jacobs’ extensive background at creating billion dollar companies, XPO is a stock-to-watch in February and is also my investment-of-the-decade as a can’t miss stock that will be worth billions in market capitalization.

Developmental Biotech to Rally in Anticipation of FDA Meeting

For those of you who follow biotechnology, you know that stocks often rally prior to an FDA meeting if the outlook is positive. In the case of Sarepta Therapeutics Inc (NASDAQ:SRPT), the stock saw gains for the ages back in October 2012 after data for its drug  Eteplirsen for Duchenne Muscular Dystrophy (DMD) was released. This is a flagship drug with an Orphan status that has revenue potential of $750 million and that could receive very encouraging news later this month from the FDA.

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