David Sterman

The status of many global economies is in flux right now. I recently looked at several foreign economies that could be headed toward a downward spiral and how it could affect your portfolio.

As a result, companies that have fairly minimal foreign exposure may have the most robust near-term prospects. The U.S. economy may not be the picture of health, but possible 2% gross domestic product  growth in 2012 looks a lot better than many of our key trading partners.

The companies with greatest domestic exposure are likely to have small market capitalizations. These firms, (which I define as having market values between $200 million and $1.5 billion) are often too small to staff a set of foreign sales offices, and their lack of foreign exposure looks like a real plus right now.

I went looking for small-cap stocks that appear poised for solid sales growth in 2012 and again in 2013. I removed any companies form the list that derive more than 20% of sales from foreign markets. Lastly, it pays to be sensitive to valuations at this tricky time in the market. Each stock on the list trades for less than 12 times projected 2013 profits.

Domestic energy plays
The small-cap universe is filled with a range of oil and gas producers, along with other commodity-focused firms. Of course, prices for their products are often dictated by global market conditions, so weakness in European and Asian economies would clearly dampen profits. Only the natural gas producers are insulated from global market trends, because that commodity is primarily produced for domestic consumption.

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com

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