There's nothing like a strong market recovery to bring out the bargain hunters in us. I suspect many will be looking around for beaten-down stocks to snap up, although most of the attention so far has been squarely focused on large-cap stocks.
That's not surprising given how cheap some blue chips have become since the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) crashed to around the 5,000-point level, although the index is making a comeback with a 3.5% jump over the past two days.
But there're also some good buying opportunities at the smaller end of the market that investors should not ignore, and Credit Suisse has listed its top three emerging stocks to buy coming out of last month's reporting season.
The first is diagnostic imaging services group Capitol Health Ltd (ASX: CAJ), which hasn't been faring too well as it has shed about half its value since hitting a record high of $1.105 in late March.
Its weak performance is due mainly to worries about its growth outlook with its full year result showing signs of a slowdown in organic growth in the second half of the financial year.
There are also concerns about Capitol Health's growth-by-acquisition strategy as the ownership changes of key competitors could make buying diagnostic businesses less financially attractive.
However, the broker thinks these worries are overblown because it thinks the slowdown in organic growth is temporary and points out that the acquisition of Liverpool Diagnostics on a 4x earnings before interest, tax, depreciation and amortisation (EBITDA) multiple proves that transaction multiples are well under control.
Credit Suisse has a price target of 92 cents on the stock.
The second stock on its list is insurance comparison website operator iSelect Ltd (ASX: ISU) with the stock tumbling close to 20% since late July.
The company's softer 2015-16 profit growth outlook is weighing on sentiment with health insurance premiums under pressure from customers looking to downgrade to low or no-frills products and management reinvesting proceeds into the business for the next phase of growth
But Credit Suisse says the dip in the stock is a good buying opportunity because iSelect can still generate revenue growth of between 10% and 20% in the current financial year and is branching out to other industries, such as energy.
What's more, iSelect could potentially undertake some capital management, such as a share buyback, as it has around $113 million in net cash.
The broker's price target on iSelect is $1.95.
The last stock is Vocus Communications Limited (ASX: VOC) and the stock is a "conviction buy" call by Credit Suisse following the telecommunication services provider's acquisition of Amcom.
The merger between the two is "highly complementary" because it brings east coast and west coast fibre networks together, according to the broker.
The target customers of both companies are also complementary as Vocus focuses on the wholesale market while Amcom is skewed towards the corporate market.
"We believe this positions the enlarged group to grow its 5% internet protocol (IP) & data market share over the next five years to ~9%," wrote Credit Suisse.
"This underpins our three-year earnings per share (EPS) compound annual growth rate (CAGR) of 38% to FY18."
The broker believes Vocus' half year result announcement in February will show early signs of this success and it has a price target of $7.15 on the stock.
