Alan Brochstein, CFA submits:

With fewer than four months to go, stocks haven’t differentiated themselves from cash as far as an impact on portfolios, returning just 0.4% as measured by the S&P 500. If you are like me and expecting stocks to make a nice run into the end of the year, or even if you are cautious, I think that smaller value stocks offer a great entry here. There are many stocks that trade close to tangible book value yet are profitable and have strong balance sheets. Poor liquidity since the "Flash Crash" is giving investors an opportunity in my opinon. While the summer has been tough on smaller stocks, YTD performance for Small-Cap Value (as measured by the Russell 2000 Value Index) has been pretty good: +3.84% through 9/3, despite an almost 10% pullback in the three months ending 8/31. So, Small-Cap Value seems capable of continuing to provide potential upside while also offering downside protection.

I ran a screen of the Russell 3000 in order to highlight potential opportunities. Here is what I did:

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David Pinsen submits:

Alloy Steel International (AYSI.OB) is a nano cap company headquartered in Australia that uses a high tech, proprietary process to manufacture protective wear plates for mining equipment. Essentially, the company is a picks & shovels play on the mining industry (particularly iron ore and coal mining, currently), an industry which has of course benefited from the demand for industrial commodities by China and other emerging economies.

Alloy Steel was the subject of a few posts here by Seeking Alpha contributer Michael Alexander, including (most recently) this post from last February, "AYSI’s disruptive technology leads to record growth and earnings". Since then, the stock has dropped by more than two thirds. Much of that drop occured after the company’s most recent quarter showed lower earnings than shareholders (including me) expected.

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Jarred Cummans submits:

With major stock exchanges in the U.S. and Europe receiving significant coverage in the financial press, developed economies in Asia have generally flown under the radar. Australia, the well developed and well-diversified economy down under, is often overlooked by many investors despite an impressive track record. The Aussie stock market has posted gains of 7.5% annually over the past 110 years, making it the best performing stock exchange in the world. The resource rich country has a stable economy that is currently the 13th largest in the world.

Australia has grown at an average annual rate of 3.6% for the last 15 years, and boasts the 11th highest GDP per capita on the globe. Despite the heavy financial focus this economy carries, Australia stayed afloat during the financial crisis that struck many markets in recent years thanks to an abundance of mineral deposits and strong demand from Asia. Though Australia has a strong economy, the nation is currently faced with political uncertainty. Recent elections left hazy outlooks for the legislative landscape, as no single party received the required number of seats to form a government.

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The stock charts of domestic plays in the Canadian junior oil market are showing no sign of life, but the junior international plays are getting respect from investors.

Sterling Resources (SGURF.PK) (SLG-TSXv; $2.40) made a 25% move in two days this week on the back of its better-than-expected results on its latest oil project in the North Sea.

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Zacks.com submits:

Winn-Dixie Stores Inc. (WINN) reported fiscal 2010 fourth-quarter results after the closing bell on Monday. Net income jumped 48.8% to $14.0 million or 25 cents per share from $9.4 million or 17 cents per share in the year-ago period. Quarterly earnings also surpassed the Zacks Consensus Estimate of 13 cents. The growth in earnings was mainly attributable to an extra week of sales and absence of a significant income tax expense recorded in the year-ago period. (See conference call transcript here.)

Quarterly Details

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After recently restructuring, junior oil and gas producer Camac Energy (CAK) is looking like a very solid emerging company. The company recently reported its first operating revenues from the Oyo Oilfield, offshore Nigeria and from the commercialization of its Enhanced Oil Recovery and Production (EORP) technology in China. At the same time, Camac benefits from a strong balance sheet, with assets of $419.5 million, no debt and cash and cash equivalents of $22 million.

The Oyo Oilfield is currently the major producing asset owned by CAK and was purchased from Camac Energy Holdings Ltd. for a 62.74% interest in the company. This was made up of 89.5 million shares in CAK, plus two cash payments for a total of $38.84 million. Oyo is located 75 miles offshore from Nigeria in 200-500 meter deep water. The Oilfield has two wells that currently produce from 12,000 to 20,000 barrels of oil per day, and gas of 15 MMCF per day and is operated by ENI/Agip, a major worldwide energy company. Oyo uses a floating production storage and offloading vessel rated at 40,000 barrels per day, with storage capacity of 1 million barrels connected to subsea wellheads. The 10 year development plan for the field envisions the drilling of 2 additional production wells.

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Saj Karsan submits:

Value investors are generally agreed that managements of going concerns should make their decisions based on long-term cash flow implications. Unfortunately, the pressures on managements to perform on a short-term earnings basis can push them to make decisions that are not in the best interests of shareholders. Consider Sterling Construction (STRL), a company that builds and repairs roads, highways and water infrastructure.

Due to the recession, the amount of work available for the company has declined, leaving it operating at a lower capacity. Idled equipment generates no revenue, but accrues charges for depreciation. This charge shows up on the income statement, but note that no actual cash charges occur (apart from any maintenance that is required).

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Steve Alexander submits:

Business Summary

Motorcar Parts of America (MPAA) remanufactures vehicle alternators and starters ("cores") for the auto repair market, focusing primarily on the "do-it-yourself" (DIY) segment. MPAA sells over 90% of its remanufactured units through auto parts retail chains such as AutoZone (AZO) and Pep Boys (PBY), where they are sold under private labels. The remainder of sales come from professional installation warehouses, sold under the brand names Quality-Built, Talon, Xtreme, and Reliance. MPAA takes used, non-working cores that are turned in by customers for a credit, dis-assembles them for parts, and then re-assembles a new, working core using those parts and new ones. 96% of remanufactured cores in 2010 were replaced by used cores, and MPAA can usually produce 100 remanufactured cores from 120 used ones. Unusable leftover parts are sold to scrap yards.

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The Gold Report submits:

Listening to Trader Tracks Editor, Roger Wiegand, talk about market conditions and precious metals is like listening to your favorite uncle tell stories at Thanksgiving. The difference is that Roger’s stories are a lot more likely to make you money. In this exclusive interview with The Gold Report, Roger offers up a few of his favorite gold and silver plays and some sage market advice.

The Gold Report: In a recent edition of Trader Tracks, you quoted a former Nixon speechwriter who said, "Economics should never be treated as a science. Its claims are not falsifiable, which is why economists can disagree so violently among themselves. Economics is a branch of anthropology and psychology. . .a moral discipline." Do you believe that’s true?

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Colin Peterson submits:

GMX Resources Inc. (GMXR) is an natural gas exploration & production company with operations in the Haynesville shale play in Texas/Louisiana. Recent weakness in natural gas prices has hurt natural gas E&P company valuations. Here’s the company’s most recent investor presentation [pdf].

GMXR’s convertible notes trade at a higher yield than its straight preferred stock, indicating at least a capital structure arbitrage opportunity and possibly some undervalued debt for us to buy.

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