For many, investing in small and mid-cap stocks are an ideal strategy for increasing returns. A recent example of this occurred with the strong performance of 15.47% for the Russell 2000 Index during the last quarter. This highlights the benefits of owning this size of company in today’s marketplace. Several firms from this category that I will examine include Chimera Investment (CIM), Alcatel-Lucent (ALU), Huntington Bancshares (HBAN) and Hercules Offshore (HERO). Please Use my analysis as a starting point for additional research before you plunge in.
Chimera Investment trades a forward price earnings ratio of 6.13. The balance sheet includes revenues of $614 million, cash of $9.82 million and debt of $6.02 billion. The earnings have been volatile during the last year by declining from $.17 to $.06. This has helped to increase the weakness in the stock with shares trading below the 200 day moving average (which is bearish). Moreover, the volume has decreased and shares have formed some kind of double pattern. The problem going forward is the lack of confidence in the profits of the firm. This has caused shares to trade slightly higher and reverse. The same kind of situation is taking place with the recent rally in the stock to $2.76. Until there is more clarity in the earnings prospects, Chimera Investments will face continuing challenges. This will be fueled by fears surrounding the balance sheet and possible liquidity challenges. As a result, investors should avoid the stock.To continue reading, click here.