Small- and mid-cap stocks have the biggest potential for growth. Investopedia
defines a small-cap as a company with a market capitalization, or
market value, between $300 million and $2 billion. A mid-cap has $2
billion to $10 billion in market value. Which ones should you consider
investing in for the second quarter? I asked a panel of financial
advisors and analysts to share their best investing idea.
1. Copa Holdings (CPA), $2.8 billion market cap
By Alex Pape, CFA
Do you hate flying? Despise airlines? No argument here. But put all that away right now. Emotion and anecdote have no more place in investing than moon cycles and election predictions.
Copa Holdings (CPA) is a little-known Panamanian airline with a competitive moat wider than the country’s famed canal. It is also absolutely feared and despised by the market right now.
Yes, the stock has risen 35% since the beginning of the year, but
focus instead on the 60% it has fallen over the past two years. That’s
$3 billion of value the market believes has vanished from this business.
And why? Venezuela. Venezuela’s all-but-shattered economy and a massively devalued Bolivar have led to restrictions on moving currency outside the country. There’s also that the country is led by a gentleman who officially moved the date of Christmas to November 1st and passed a law capping the price of Barbie dolls. So investors are rightfully jittery. Copa flies Venezuelan routes and has about $500 million tied up with the country. But selling off $3 billion of value for what is at most a $500 million problem is a mistake for them and an opportunity for us.
It’s also not as if Copa’s management, among the best in the
industry, is sitting on its hands. These folks designed the Copa model,
connecting second- and third-tired Latin American cities with only
enough demand to support a single daily flight. Free from grating price
wars, Copa collects premium rates and focuses on execution, putting up
on-time performance and load factors (a measure of how efficiently an
airline turns seats into dollars) that would make Delta (DAL) and
Southwest (LUV) drool. Management’s cleverness hasn’t expired; they’ve
begun charging Venezuelan fares in U.S. dollars while paying off about
$10 million of expenses each month in Bolivars. Ironically, as other
Venezuelan operators have fled, Copa’s routes in the country have become
among their most profitable.
1. Copa Holdings (CPA), $2.8 billion market cap
By Alex Pape, CFA
Do you hate flying? Despise airlines? No argument here. But put all that away right now. Emotion and anecdote have no more place in investing than moon cycles and election predictions.
Copa Holdings (CPA) is a little-known Panamanian airline with a competitive moat wider than the country’s famed canal. It is also absolutely feared and despised by the market right now.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, March 21, 2016. (Michael Nagle/Bloomberg)
And why? Venezuela. Venezuela’s all-but-shattered economy and a massively devalued Bolivar have led to restrictions on moving currency outside the country. There’s also that the country is led by a gentleman who officially moved the date of Christmas to November 1st and passed a law capping the price of Barbie dolls. So investors are rightfully jittery. Copa flies Venezuelan routes and has about $500 million tied up with the country. But selling off $3 billion of value for what is at most a $500 million problem is a mistake for them and an opportunity for us.
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