Small-cap expert Jim Oberweis saw his 2013 Top Pick soar over 150%. Here, he explains why he is still bullish on the name. Also a manager of three Asia small-cap funds, Jim offers four current favorites among emerging global growth ideas.
Steve Halpern: We're here today with small-cap and emerging growth stock expert, Jim Oberweis. Editor of the Oberweis Report. How are you doing today, Jim?
Jim Oberweis, Jr.: Very well. Thank you for the opportunity.
Steve Halpern: We're conducting a series of interviews with the top performing advisors from last year's Top Picks Report. This past year, your top stock pick, Datawatch (DWCH) rose more than 150%. Congratulations on that.
Jim Oberweis, Jr.: Thanks. It's been a great year for us.
Steve Halpern: Could you review the original reasoning behind that stock selection and explain to listeners what's happened over the past year to account for the stock's strong performance?
Jim Oberweis, Jr.: Sure. So, Datawatch specializes in data visualizations. It's a hot space right now, but basically, organizations need to be able to take an increasingly crazy amount of data—some of it which is structured, and some of it which is very unstructured—and put it into a form or a picture where they can try to figure out what's going on.
This could be for a variety of applications, anywhere from data crossing a Wall Street trading floor, for example, or for detection of credit card fraud. Those types of applications.
So, Datawatch was a great company, with great technology, lousy management, and very poor front-end interface. In the last couple of years, they've corrected those things.
They went out and bought a company to, kind of, help with the front-end. Then, a relatively new management team came in to try to put the building blocks in place for a really well-run organization. That led to improved financial results, which is then, being manifested in a much higher stock price.
Steve Halpern: What do you foresee for the company over the coming year, and would you still recommend it, for those who followed your initial recommendation and own the shares?
Jim Oberweis, Jr.: I would. It's a little more expensive right now, but it's still fairly undiscovered, relative to some of their other peers, they're still a very small company.
We think that in the next 18 months, they'll go from having re-tuned the company, to having those changes drive bottom line profitability. I do think that there is continued up-side in Datawatch, even from its current levels.
Steve Halpern: I'd like to touch-on one general question. You're a noted expert in the small-cap arena. Small-caps, in general, have been very strong this past year. Would you expect this outperformance to continue in 2014?
Jim Oberweis, Jr.: Yeah, it kind of feels like it to be honest. We watch stock performance in a couple of different ways. First, we'll look at how valuations compare with history. For much of the last two years, valuations were sharply below average. Valuations are now, just slightly, above average.
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The expert featured in this column, James Oberweis, may or may not own positions in any investment vehicle mentioned here. The views and opinions expressed are his or her own.
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