Four Small-Cap stocks that billionaire Buffett prefers

With the Federal Reserve's promise for several rate increases this year and President Donald Trump's focus on deregulation, the outlook for insurers may be improving.
Using guru-based stock screening models, here are one financial services company and three small-cap insurers that earn high marks.

1. INTL FCStone (INTL)

This financial services company with a market capitalization of $687 million provides advisory services as well as products as well as advisory services. This company also earns a perfect score from our James O'Shaughnessy model, based on its favorable price-sales ratio of 0.05, well under the 1.5 maximum, and its relative strength of 65 -- a comparison of stock performance to the overall market -- that places it in the top 50 stocks passing this screen.
Our Peter Lynch-inspired model also likes INTL FCStone for its price-earnings growth ratio of 0.43 and average earnings per share growth rate of 29.9%, which falls right in the sweet spot between 20% and 50%, as required by this screen. The equity-assets ratio of 7% is above the minimum requirement of 5%.

2. Maiden Holdings (MHLD)

Through its subsidiaries, Maiden Holdings provides reinsurance solutions for regional and specialty insurers in Europe, the U.S. and other global markets. The company passes our Lynch-based stock screen, due to its favorable PEG ratio of 0.60, EPS of $1.33 and equity-asset ratio of 24%, well above the 5% minimum requirement. Return on assets of 2.29% is a plus.
The free cash flow-price ratio is considered a bonus if it exceeds 35%. At 37.53%, Maiden Holdings shows well.

3. Selective Insurance (SIGI)

This holding company with insurance subsidiaries has a market cap of $2.42 billion. It gets a thumbs-up from our Lynch-based investment methodology for its favorable equity-assets ratio of 21%, more than five times the required level, and its ROA of 2.31%, more than double the required benchmark.
The PEG ratio of 0.37 is considered favorable. Our O'Shaughnessy-inspired screen likes the company's persistent EPS growth and the stock's relative strength of 63.

4. Universal Insurance Holdings (UVE)
This private, personal residential homeowner's insurance company has a market cap $971 million. It earns a perfect score under our O'Shaughnessy-based stock screening model, based on its persistent EPS growth over the past five years as well as its price-sales ratio of 1.45, based on trailing 12-month sales.
The company is also favored by our Lynch-inspired investment strategy for the relationship between its PEG ratio, a hallmark of the Lynch strategy, which, at 0.18, is very favorable, as anything below 50 passes with flying colors.
Average EPS growth of 46.9%, based on three-, four- and five-year averages, is within the preferred range for this model. ROA of 9.75% is well above the minimum requirement of 1%.

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