An ignored stock has become a tremendous opportunity, portfolio manager says
In a market where investors aren't focused on earnings, opportunity can be found in companies that can grow regardless of the macro backdrop, portfolio manager Stephen DeNichilo said Tuesday.
A perfect example is the often-ignored specialty chemical company Kraton Performance Polymers (KRA), up 90 percent year to date, he told CNBC's " Power Lunch ."
In fact, he thinks the stock can still double from here.
"They have the highest margins in the sector and the lowest valuation," said DeNichilo, who manages $9 billion as portfolio manager at Federated Kaufmann Funds.
He said the company has been easy to ignore, given that it has had a lot of drama over the last few years — including a failed merger, high capital expenditures, oil volatility and the purchase of another company that doubled its size.
However, the company said it sees $100 million in cost and sales synergies over the next two years and an incremental $500 million in free cash flow, DeNichilo pointed out.
"I've never seen in my career a company where the management is jumping up and down saying that they have cost synergies out there and the Street is not recognizing it," he said.
Shares of the small-cap company popped after DeNichilo's comments and were up about 6 percent in afternoon trading.
— CNBC's Hailey Lee contributed to this report.
Disclosures: KRA is an investment banking client of Federated Kaufmann Funds