I'm Buying This Stock as Thin Trading Offers Great Opportunities

Trading is -- as expected -- thin and random on the day after Christmas. 

Breadth is running 3,300 gainers to 5,750 decliners, but there is a little rotation out of the Nasdaq 100 QQQ and into the Russell 2000 IWM and the Dow Jones industrial average. It isn’t a big move, but the Magnificent Seven stocks MAGS are down about 0.9%, while the IWM is up 0.2%.

I’m looking to take advantage of thin trading in stocks that I think have strong fundamentals. There has been quite a bit of weakness in small caps lately that has hurt many stocks simply because they are in small-cap exchange-traded funds, but still have good fundamentals.

An example of one name I’m looking at is Sensus Healthcare SRTS. The company describes itself as a "global pioneer" in non-invasive treatments for skin cancer and keloids using its superficial radiotherapy technology.

The company is selling its equipment primarily to dermatologists and recently introduced a new program where it shares revenue from the procedures. It previously had sold or leased the equipment outright. It is now developing an ongoing revenue stream and noted in its conference call that it has already signed an agreement with one large group practice and is in talks with others.

Sensus is expected to produce earnings per share of $0.43 in 2024 and increase that 49% to $0.64 in 2025. It is trading with a trailing price-to-earnings of 12 and has a very strong balance sheet with substantial cash.

The stock trades very thinly and has done a complete U-turn after issuing a very strong third-quarter report. It is now back in the recent trading range and has significant technical support, around $6.50.

There are many other small caps that have been caught in the Russell 2000 collapse in December and many of them have strong fundamentals. There are quite a few, and the market is offering some good entry points for traders who are willing to be patient.

At the time of publication, DePorre was long SRTS.