Hot Penny Companies To Watch For 2014

Last week, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) ended up 0.09% at 15,559 points after hitting an all-time high Tuesday. The S&P 500 (SNPINDEX: ^GSPC  ) trailed Mr. Jones early in the week but managed to retake some of its gains for an overall 0.23% dip.

^DJI data by YCharts.

Sticky earnings
The last Dow stock to announce earnings last week was 3M (NYSE: MMM  ) , which reported on Thursday. The company missed on the top line but made up for it with slightly better-than-expected net income. 3M's $7.75 billion in revenue came in $20 million below estimates, but EPS added an extra penny to analyst predictions. Expectations aside, sales are up a seasonally adjusted 2.9%, while EPS rose 3%.

Hot Penny Companies To Watch For 2014: Prospect Capital Corporation(PSEC)

Prospect Capital Corporation is a mezzanine finance and private equity firm that specializes in late venture, middle market, mature, mezzanine, buyouts, recapitalizations, growth capital, development, and bridge transactions. It makes secured debt and equity investments. The firm typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. The firm prefers to invest in the United States and Canada. It seeks to invest between $5 million to $50 million in companies with EBITDA between $$ million and $75 million, sales value up to $500 million, and enterprise value of up to $250 million. The firm also co- invests for larger deals. It seeks control acquisitions by providing multiple levels of the capital structure. Prospect Capital Corporation was founded in 1988 and is based in New York, New York.

Hot Penny Companies To Watch For 2014: Cowen Group Inc.(COWN)

Cowen Group, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides alternative investment management, investment banking, research, and sales and trading services for its clients. It manages separate client focused portfolio through its subsidiaries. Through its subsidiaries, the firm invests in equity and fixed income markets. It also invests in alternative investments markets through its subsidiaries. Cowen Group, Inc. was founded in 1994 and is based in New York, New York with additional offices in Boston, Massachusetts, Chicago, Illinois, Cleveland, Ohio, Dallas, Texas, and San Francisco, California.

Advisors' Opinion:

• [By Michael Brush]

  The name isn't as common as others here, but you might remember the boutique investment banking and stock research shop Cowen Group (COWN). It helped hatch many of the midsize, high-growth tech and health-care companies during the late 1990s boom. Cowen itself went public in 2006, just in time to get trounced by an economic meltdown.

  Since the economy's upward turn, Cowen's stock hasn't rebounded as well as bigger rivals like Goldman Sachs, GS. But its time will come, insists Anton Schutz, the manager of the Burnham Financial Industries Fund (BMFIX), which owns the stock. "In a true bull market, Cowen is capable of earning over $1 a share," says Schutz. Since boutique investment banks carry price-to-earnings ratios at least in the low teens in good times, this stock could double or even triple from recent levels of $4 a share, Schutz reasons.

  Cowen recently purchased the brokerage LaBranche (LAB), whose presence on the Hong Kong stock exchange should help Cowen increase its investment banking business in China. "I expect this area to be of vital importance in growth for us," Cowen CEO and Wall Street veteran Peter Cohen said in the company's most recent conference call. LaBranche also gives Cowen much-needed electronic platforms supporting options and high frequency trading, says Sandler O'Neill analyst Devin Ryan, who has a $7 price target on the stock.

  Asset management arm Ramius, which offers hedge funds and mutual funds, should continue to perform well as the stock market and economy rebound. These trends will also support Cowen's U.S. brokerage and investment banking businesses. "The smaller brokers don't need that many crumbs to fall off the table to make some really good money," Ryan says.

  Meanwhile, Cowen's stock looks cheap, trading at about 70% of book value, compared with a 24% premium to book value at bigger rivals like Goldman Sachs (GS). That protects investors against downside, and also makes Cowen a possible buyout target.

10 Best Small Cap Stocks To Buy For 2014: Telecom Corporation of New Zealand Limited(NZT)

Telecom Corporation of New Zealand Limited, together with its subsidiaries, provides telecommunications services, as well as information, communication, and technology services in New Zealand and Australia. Its products and services include local, national, international, and value-added telephone services; mobile services; data, broadband, and Internet services; IT consulting, implementation, and procurement services; and equipment sales and installation services. The company also involves in the retail of telecommunications products and services. It serves residential, business, and government customers. Telecom Corporation of New Zealand Limited was founded in 1987 and is based in Auckland, New Zealand.

Advisors' Opinion:

• [By Chuck Carlson]

  Trading for just seven times earnings and yielding a 10% dividend, it's also nice to know that it's a monopoly in New Zealand. And, on top of that, with gold prices soaring, it's worth noting that the currency most closely correlated with gold is the New Zealand currency (affectionately known as the Kiwi dollar), making the company a nice backdoor play on gold.

Hot Penny Companies To Watch For 2014: Skystar Bio-Pharmaceutical Company(SKBI)

Skystar Bio-Pharmaceutical Company engages in the research, development, production, marketing, and sale of veterinary healthcare and medical care products in the People?s Republic of China. Its products include veterinary medicine for poultry and livestock; micro-organism products; bio-pharmaceutical veterinary vaccines; and feed additives. The company offers its products through distributors and directly to customers. Skystar Bio-Pharmaceutical Company is headquartered in Xi?an, the People?s Republic of China.