When you have a market that’s in the process of hammering out a bottom (as I believe we have right now), my “best investing idea” involves carefully adding some of the very best small cap stocks to your portfolio.

But how do you uncover and identify the very best small cap companies?

Well, the trick is to identify specific market niches that are in the very early stages of growth – and invest in the companies (if any) that are positioned to exponentially grow sales, revenues, and profits when these market sectors take flight.

In this spirit, here are three of the top market niches that I’ve recently identified – and the corresponding small cap stock charts that fit into each powerful category.

Market Niche: Bullish on Titanium

I find it amazing that we’re in the heart of a commodity boom – not one in a hundred commodity investors realizes that titanium (not steel) will soon be viewed as “The Metal of the 21st Century.” In fact, while steel stocks are blasting higher across the board, one small cap titanium stock (listed below) could be one of the best investing opportunity you see all year.

Here’s the situation…

Discovered in 1791 and named after Titans of Greek mythology, titanium is a light, strong, and corrosion-resistant metal with a grayish color. The two most useful properties of titanium are the fact that it’s resistant to corrosion and that it has the highest strength-to-weight ratio of any metal.

In its unalloyed condition, for example, titanium is as strong as steel but 45% lighter.

As you can imagine, this unique combination of strength, light weight, and corrosion resistance makes titanium useful in hundreds of applications. For example, it can be alloyed with iron, aluminum, vanadium, or molybdenum to produce alloys for jet engines, missiles, spacecrafts, petro-chemicals, or desalination plants.

If you’ve bought a new golf club in the last 12 months, odds are the overweight head on your driver is made of titanium.

And here’s the thing. When you consider the cost benefits of titanium on lifetime basis, the market is quickly discovering that no other metal is as reliable or as economical as titanium.

It’s categorized into the “Nonferrous Metals” group, which is defined as a metal (other than iron) such as copper, lead, zinc, nickel, and aluminum – and this is one of the specific sector niches that I’m bullish on right now.

The top small cap company that’ll capitalize off this titanium bullishness is Titanium Metals (TIE – NYSE). And in fact, TIE just might be the most undervalued stock on the S&P 500.

After all, if you run a screen of stocks on the S&P 500 that are down over 30% in the past three months and that also carry double digit earnings growth forecasts for the next fiscal year, the one company with the most attractive readings is TIE!

Their 3-month percent change is -42.5%, yet their Earnings Per Share growth rate currently stands at 35.3%. No other stock, which has fallen over 31%, has earnings per share growth this high. Not even Google (GOOG – Nasdaq)!

Therefore, you can realistically argue that TIE is the most under-valued stock on the S&P 500 right now. No other company with an EPS growth rate of 35% has fallen so far, and the best part is, most investors don’t realize this fact.

I’m currently recommending shares of TIE in my Bottarelli Research Small Cap letter, and I advise you to pick up some shares as well.

Sincerely,
Bryan Bottarelli
Editor, Bottarelli Research Small Cap

P.S. If you’d like more information on Bottarelli Research Small Cap, we invite you to review the letter below: