While it’s good to think big, thinking small is just as great. This is particularly true about micro-cap stocks which often provide investors with some massive payoffs. Not only do these stocks come at a low capital cost but they are also a great way to diversify your portfolio. The only downside is the element of risk that’s involved, given the small size of the company.
With 2020 in the rearview mirror, this is the perfect time to reevaluate your portfolio. Moreover, micro-cap stocks tend to outperform the market in periods of recovery. If you are looking to add some smaller investments to complement the larger ones in your portfolio, here are seven great stocks that are worth the risk.
- Yelp (NYSE:YELP)
- Waitr Holdings (NASDAQ:WTRH)
- Upwork (NASDAQ:UPWK)
- Celsius Holdings (NASDAQ:CELH)
- Zuora (NYSE:ZUO)
- Alpine Immune Sciences (NASDAQ:ALPN)
- Impinj (NASDAQ:PI)
Micro-Cap Stocks: Yelp (YELP)
Since making its market debut in 2012, Yelp stock saw a strong rally in the years that followed. But the company fell off its IPO high as the markets eventually lost interest in the company.
After a 168% rise in its stock price from 2014 to 2019, shares have seen a steady decline — dropping as much as 80%. This situation only worsened with the pandemic this year. But despite the doom and gloom, Yelp is poised to come out of the pandemic stronger.
This is because the company’s business model caters perfectly to the stay-at-home economy. In addition to restaurant reviews and recommendations, Yelp’s platform offers recommendations for gardeners, plumbers and electricians. As more people spent time at home, the demand for these services increased, resulting in more traffic on the platform. The company responded to its newfound demand by reconfiguring its business with additional features on the app.
Experts believe that Yelp will see a strong recovery as the world emerges from the pandemic. This is one of the best micro-cap stocks to buy for a post-pandemic world.
Waitr Holdings (WTRH)
With the impressive performance of large companies in the food delivery space this year, it’s also worth looking at smaller companies in the industry. Like many industries, Waitr Holdings hit a low in March but has seen a spectacular rebound since then.
This recovery can be attributed to the spike in demand for takeout orders along with the cost-cutting measures implemented by management. Under the reigns of a new CEO, WTRH stock was able to go from bankruptcy to profitability in six months.
Experts believe the takeout trend is one that will continue long after the pandemic. This will result in some massive gains for Waitr in the months and years ahead. Although the company is smaller than peers like DoorDash (NYSE:DASH), it has a growing presence- especially in rural areas. Waitr currently provides a delivery service from over 19,000 restaurants in 700 cities.
Given the potential for growth, this is among the top micro-cap stocks to buy in the food delivery sector.
The gig economy was an emerging trend before the pandemic but 2020 led to an unprecedented spike in its growth. This bodes well for freelance job platforms like Upwork that saw a 200% increase in its stock price this year.
As more people continue to work-from-home, Upwork which connects freelancers to companies caters perfectly to a remote economy. In addition to this, hiring contractors is a great way for businesses to cut costs during a tumultuous time.
More companies turned to Upwork’s service this year, resulting in a 24% increase in sales in Q3 (year-over-year). The pandemic created numerous changes in the way companies operate. Some businesses will continue to operate with a lean in-house team even after the pandemic which will mean hiring more freelancers.
At its current price of $34.52, UPWK stock is one of the top micro-cap stocks to buy in 2021.
Celsius Holdings (CELH)
The energy drinks market has some strong players but Celsius Holdings is an up and coming name in the sector. The company produces energy drinks that boost metabolism and burn fat. This focus on fitness is a major reason for its popularity among customers. Since the start of the year, its stock has increased tenfold with room to go higher. More recently, Celsius was added to the S&P SmallCap 600 index pushing its shares up by a further 12%.
Celsius’s financials are quite impressive as well. In its most recent quarter, sales increased by 80% to $36.8 million. European revenue was also up by a whopping 182%. This was achieved despite a shortage of cans as a result of the pandemic. As people look to achieve their fitness goals in the new year, CELH stock is one of the top micro-cap stocks worth holding on to.
A contactless economy made many fintech companies that cater to the remote economy an essential service. One such company is Zuora which allows businesses to scale their subscription business model.
To be sure, 2020 was a tumultuous year for the company as businesses were more hesitant to make dramatic changes to their model. Zuora’s growth slowed down as result, with ZUO stock down 3.5% this year.
Nevertheless, the opportunity for growth in the subscription remains large. Despite a tough environment this year, Zuora sees some major upside as the world returns to a new normal. The subscription economy was an emerging trend prior to the pandemic and while this came to a halt this year, it will grow once again as we head toward a new normal.
This makes it a great time to capitalize on this trend and buy Zuora stock while prices remain low.
Alpine Immune Sciences (ALPN)
Biotech firms were no stranger to market gains this year and Alpine Immune Sciences is one of the winners of this rally. While the company was not involved in the production of the vaccine formula, it did score big with its anti-inflammatory drug. Alpine recently announced an $805 million partnership with AbbVie (NYSE:ABBV) to develop the ALPN-101. This is expected to result in a major revenue stream for the company.
In addition to this, the company also has a number of projects in the pipeline like the ALPN-202. In terms of its long-term growth, the projects currently under development will ultimately help the company reach its full potential.
ALPN stock is among the top micro-cap stocks to invest in with its share price is up 205.2% in the last year.
Impinj produces radio-frequency identification (RFID) tags and software that help companies track and manage their inventory. Although its products are revolutionary for many businesses it also has a large exposure to the brick and retail space. With physical stores shut for much of 2020, it’s been a tough year for the company. After a 25% increase in revenue in 2019, the value was down 9% in the first nine months of 2020. Management expects further downside with a 15% dip in revenue.
But despite the poor numbers, Impinj will thrive in a post-pandemic world. In an increasingly competitive retail environment, the company’s products will help businesses with better inventory management while improving accuracy and speed.
Given the potential for growth in a post-pandemic world, many investors consider PI stock to be a great buy right now. Micro-cap stocks like this one will generate huge returns as the world returns to normal.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.