3 stock picks from top small-cap fund managers

What are small-cap mutual fund managers investing in, now that stocks of smaller companies are outperforming those of larger ones? The Associated Press recently asked two top fund managers for their current favorite stocks.

1. CSG Systems International Inc. (CSGS)

Industry: Customer care and billing services for cable and satellite television companies, including order management, account setup and sales support

Market capitalization: $546 million

Stock price: $15.79

52-week range: $12.13 to $21.59

Year-to-date stock performance: up 7.3 percent

Price-to-earnings ratio: 17.6

Jayme Wiggins, Intrepid Small Cap Fund (ICMAX): “The firm’s last acquisition was modestly disappointing, and industry pricing has been pressured over time. Nevertheless, the current stock price already implies a large reduction in earnings power. We think today’s multiple is too low for this high-cash flow, recurring revenue business.”

2. Bill Barrett Corp. (BBG)

Industry: Natural gas and oil exploration and production company, primarily in Colorado, Wyoming and Utah

Market capitalization: $1.4 billion

Stock price: $27.78

52-week range: $26.30 to $52.13

Year-to-date stock performance: down 18.5 percent

Price-to-earnings ratio: 21.3

Wiggins: “The recent drop in natural gas prices has created an opportunity in Bill Barrett. This exploration and production firm has dramatically reduced its dependence on ‘dry gas,’ as oil and natural gas liquids will probably represent half of revenue this year. The company is spending heavily to develop its reserves, but we believe debt will remain manageable.”

3. Associated Banc-Corp (ASBC)

Industry: Wisconsin-based regional bank parent company

Market capitalization: $2.3 billion

Stock price: $12.83

52-week range: $8.74 – $15.15

Year-to-date stock performance: Up 14.9 percent

Price-to-earnings ratio: 19.8

Adam Peck, Heartland Value Plus Fund (HRVIX): “This stock has been trading at about 0.8 times book value. Historically, this stock has traded at 1.5 times book value, on average. So if the stock returns to its historical average, it would nearly double in price. This bank has a great balance sheet with high capital levels.

“Associated had major credit problems coming out of the recession, which is why its shares got so cheap. But they brought in a new CEO who has significantly improved operations. Problem loans were fixed. And loans are growing again. You kind of have everything you want, but the market hasn’t recognized it.”


Returns through Feb. 15, 2012

Data source: Morningstar