There’s little doubt that the U.S. economy going great guns right now. And one of the big winners will be small-cap stocks.
While on one hand there’s lots of talk regarding inflation — the key concern in a rapidly expanding economy — there’s also excitement.
If you own a stock with a $40 billion market cap, it’s going to take some doing to double that market cap. But if you have a $500 million or $1 billion company, doubling the size isn’t too farfetched in this kind of market.
Plenty of small-cap stocks have already seen investors dive in and run up their valuations in anticipation of big payoffs. The featured stocks below all have market caps below $2 billion. Some have been my favorites for a while.
But the fact is, these small-cap stocks are well positioned to score big in coming months. Oh, and each has an ‘A’ rating in my Portfolio Grader.
- A-Mark Precious Metals (NASDAQ:AMRK)
- Camtek (NASDAQ:CAMT)
- Clarus (NASDAQ:CLAR)
- Danaos (NYSE:DAC)
- First Commonwealth Financial (NYSE:FCF)
- MYR Group (NASDAQ:MYRG)
- Tenneco (NYSE:TEN)
Small-Cap Stocks to Buy: A-Mark Precious Metals (AMRK)
When inflation ramps up, usually precious metals prices tend to rise. Actually, with the run in industrial commodity prices, all metals have been rising.
AMRK is a leading integrated precious metals firm that has been around since 1965. It specializes in gold, silver, platinum, palladium and copper. It sells, distributes and stores bullion and coins to consumers and wholesalers. It also provides collateralized loans against precious metals.
Gold sold off earlier this year, but it’s making its way back. And this is the case with the other metals AMRK deals in. The exception is copper, which has taken off in the past year.
All this is good news for AMRK. With a market cap just below $500 million, there’s plenty of headroom at this point. And it’s a smart way to pick up a precious metal hedge in case inflation isn’t “temporary.”
AMRK is up 61% year to date, yet trades a current price-to-earnings ratio below 3x.
If you’re looking for a pick and shovel company in the semiconductor industry, look no further.
We’ve all heard about the shortage of semiconductors across various industries due to production slowdown and stoppages during the pandemic. Ramping up is going to take a while — some say another year.
That has meant investors started buying chipmakers. But smart investors are digging down another layer. And that’s where CAMT thrives. It makes inspection and metrology equipment for the semiconductor industry.
It’s fine to make chips, but you need quality controls and that’s what CAMT does. Even after the backlog is filled CAMT will have plenty of work since everything we own these days has some sort of chip in it.
CAMT has a $1.5 billion market cap and is up 50% year to date. It’s a bit expensive, but this sector is set to make small-cap stocks big-cap stocks in the months and years to come.
Small-Cap Stocks to Buy: Clarus (CLAR)
Go outside! You may have heard this when you were a kid (or said it to your kids). And during the pandemic that was one of the safest places to be — the great outdoors.
That’s where CLAR has focused its business. It operates a handful of brands for outdoor enthusiasts, from skiers, mountain and rock climbers, to hunters.
Business has been good and the stock has been growing. It currently sits at an $880 million market cap and investors remain very bullish on its prospects moving forward.
The pandemic has reinvigorated the outdoor sports segment and Gen Xers and Gen Ys are keen on experiencing new activities rather than lounging about in resorts.
The stock is up 81% year to date in anticipation of the great demand for outdoor products, but it’s out over its skis currently. Take small bites on this one over time.
When the global economy starts to reopen, resupplying businesses becomes a big piece in the expansion. And getting goods from one place to another means transport companies start seeing significant growth.
DAC is one of the world’s largest independent container shipping companies.
The Baltic Dry Index is a measure of demand for “dry” goods (not oil or other “wet” goods) demand. The index is up more than 90% year to date. And that’s very good news for DAC.
What’s good news for us is, the stock is off its highs. DAC recently reported FYQ1 earnings and investors were disappointed, although the numbers were solid year over year. Shipping companies can be volatile, so it’s not a steady small-cap stock.
But after a 200% run year to date, the stock is still trading at current P/E of 3x. And shipping demand is growing.
Small-Cap Stocks to Buy: First Commonwealth Financial (FCF)
This Pennsylvania-based regional bank focuses on operations in Western Pennsylvania and Northeastern Ohio. It operates as First Commonwealth Bank and has been around since 1982.
This region is the heart of America, drawing workers over the decades for mining, manufacturing and production jobs. In recent years it has begun to work itself out of the devastation brought during the economic crisis in 2008.
Plus, smaller cities are drawing more remote workers leaving crowded, expensive big cities for a better quality of life. And FCF is there to serve them.
Financials are great long-term small-cap stocks (if they’re run well) because they’re built to last and grow conservatively. Plus, they usually have a solid dividend.
FCF is up 24% year to date, delivers a 3.3% dividend, and is trading at a current price-to-earnings ratio of 12x. It’s not going to be rapid grower, but it’s a great time for a long-term position.
MYR Group (MYRG)
When the power goes out, you see the bucket trucks and other equipment on the move. But it’s not always the power company that is on site. Many times, it’s contractors to the power companies. One of those is MYRG.
With drought, record heat and forest fires demanding more from our old, stressed power grid, maintenance is a growth industry. And MYRG is one of the leaders in this work.
MYRG dates back to 1891 and serves much of the U.S. as well as Western Canada. And in 2020 it made Fortune’s list of 100 Fastest-Growing Companies. And the upcoming infrastructure spending bills are only going to accelerate its growth.
Its $1.5 billion market cap makes it one of those small cap stocks that has big growth potential as well as a secure sector.
The stock is up 47% year to date, yet it’s trading at a P/E of 22x.
Small-Cap Stocks to Buy: Tenneco (TEN)
Used car prices have been rising rapidly for a couple months now. Much of that is due to the lack of available new cars because of chip shortages. Consumers looking to buy a new car at low interest rates are buying used vehicles instead.
And even in the transition between gas engines and electric vehicles, gas vehicles still make up a significant majority of demand. That’s where TEN’s bread is buttered. It serves carmakers as well as automotive parts suppliers with parts from suspensions to diesel filters.
You won’t see its name on a lot of what it makes. That’s because it owns subsidiaries with brand names, or it directly contracts big-time vehicle manufacturers.
Its $1.5 billion market cap puts it in our small-cap stocks list. And after a big run beyond 105% over the past year, it’s backing off a bit. The stock is up 51% year to date.
On the date of publication, Louis Navellier has positions in CAMT, CLAR and DAC. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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