2 Small-Cap Stocks That Could Be Righting the Ship

Stocks continue to roll last week. The Federal Reserve delivered its third quarter-point cut in interest rates on Wednesday. We also continued to see better-than-expected third-quarter results, including results from tech bellwethers such as Facebook Inc. , Intel Corp. and Microsoft Corp. that buoyed investor enthusiasm. As a result, the S&P 500 hit a new all-time high for the first time since July. Equities also got a nice boost from a strong jobs report on Friday. About 128,000 jobs were created in October according to the Bureau of Labor Statistics. That figure was far above the consensus of 75,000 jobs. Results would have been even better if not for the decrease of 42,000 jobs in the auto sector thanks to the strike at General Motors Co. . In addition, the September and August jobs numbers were revised up by 95,000. Wage growth came in at 3% on a year-over-year basis, slightly below growth rates earlier this year but still near decade highs and far above inflation. This rate of increase should continue to ensure solid consumer spending levels. The thing that is particularly impressive about the jobs picture is that the increases are happening despite an obvious slowdown in the manufacturing sector. As the labor market tightens, individuals are coming off the sidelines. More than one million people have entered the work force since July, bumping the labor participation rate to 63.3% despite an increasing amount of retirements among baby boomers. Particularly impressive in trading Friday was the Russell 2000 rising 1.7%. That part of the market is somewhat insulated from trade tensions and is benefiting from a strong domestic consumer spending and a solid jobs market. The small-cap benchmark definitely cheered the strong jobs report on Friday. Here are couple small-cap names I think look attractive as we head into the end of 2019. Let's start with Stemline Therapeutics Inc. . Stemline shares soared after its second-quarter results blew away expectations around sales for recently approved Elzonris. Stemline used the rally to raise additional capital via a secondary offering. The shares soon lost steam and fell more than 40%. However, over the past few weeks the stock has gained traction again. More importantly, Stemline should report third-quarter results this week that hopefully will be a repeat of its second-quarter beat. The stock of Entercom Communications Corp. also seems to have stabilized after a big decline. Entercom has struggled to integrate the acquisition of CBS Radio into its overall business operations. Its stock plunged this summer when it slashed its dividend to free up funds to pay down debt. Radio also has been a very challenging space with several competitors filing for bankruptcy in recent years. However, Entercom is solidly profitable, with operating income surging in its last quarterly report while EBITDA was up 7%. Shareholders hated to see the dividend cut drastically, but it was the right thing to do from a longer-term perspective as it freed up $40 million a year for other uses. As Entercom pays down debt and adds podcasting to its offerings, the shares should start to recover. Its business also should benefit in 2020 from the massive political spending on advertising in front of the November elections. I believe both these companies have brighter futures than what is currently reflected by the market.

2 Small-Cap Stocks That Could Be Righting the Ship

Stemline Therapeutics and Entercom Communications seem to have stabilized after notable declines late in the summer.

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