Small-cap stocks usually connote some sense of “less than” to investors that are used to buying names that they hear in the news or from their friends. Plus, big-name, large-cap stocks have been doing well, so why not go with what you know?
Well, the answer to that is, you don’t know what you’re missing. There are a lot of small-cap stocks that do very well in the niches they’re in. But those niches might not be on everyone’s list of sexy sectors.
Or these stocks may have contracts with bigger players in the broader industry, doing the behind-the-scenes work that keeps them in the shadows.
However, the big investors are now rotating out of the stocks that have taken them this far and looking for the stocks that are best positioned to benefit from higher inflation and faster growth. Small-cap stocks fit that bill. Below are some of my top-rated picks to get your 2022 off to a roaring start.
- A10 Networks (NYSE:ATEN)
- Gladstone Investment Corp (NASDAQ:GAIN)
- iRadimed (NASDAQ:IRMD)
- Navios Maritime Partners (NYSE:NMM)
- Perion Network (NASDAQ:PERI)
- Ryerson Holding Corp (NYSE:RYI)
- Insteel Industries (NYSE:IIIN)
Small-Cap Stocks to Buy: A10 Networks (ATEN)
Usually people think of one key piece of enterprise network support – security. And while that’s crucial, there’s another aspect these days that’s also just as vital – securely delivering apps across that network.
This is what ATEN does. It supplies enterprise scale secure network and application delivery. That includes things like load balancing and identity management. It also provides services for bandwidth management as well. As we continue to progress in this digital world of both work and e-commerce, ATEN’s services become more necessary. And it has a great position in this niche sector.
The stock is up 49% year-to-date, even after a stumble in the summer. But its current price-to-earnings ratio (P/E) is a mere 13, with a 1.32% dividend to boot. It’s still a value with a great runway.
This stock has an A rating in my Portfolio Grader.
Gladstone Investment Corp (GAIN)
Business development companies (BDCs) function a bit like private equity funds. They basically take positions in companies that are generating about $3-30 million a year in in earnings and take an equity position or finance their growth.
It’s a bit like a real estate investment trust (REIT) that’s focused on small to medium-sized businesses. They also have similar tax structures to REITS, where they have to distribute their net income to shareholders. That means, in markets like this, BDCs are in growth mode, helping their portfolio companies grow in a rising economy. And as rates rise, GAIN’s margins rise as well.
In the BDC game, GAIN is a smaller player, which means bigger growth. It’s why it has made this small-cap stocks list, with a market cap around $540 million. GAIN has risen 61% YTD but has a current P/E below five and a 5.4% dividend.
This stock has an A rating in my Portfolio Grader.
Small-Cap Stocks to Buy: iRadimed (IRMD)
The one thing you want to look for in small-cap stocks is have they managed to create a unique niche in a growing industry? Healthcare is one of those industries.
IRMD makes MRI-compatible medical devices. If you’re unfamiliar with MRIs, they are magnetic resonance imaging machines, with the word “magnetic” being key. These machines use powerful magnetic fields to scan patients. That means no metal can get anywhere near the machines, so devices need to be precision made without metal. IRMD is a big fish in this pond.
But it’s also a growing field since it’s safer than doing prolonged or repeated x-rays. And they have much better clarity and test over time, which can be very helpful.
IRMD stock has gained 91% YTD, and its P/E is similarly high. But this is a growth sector and IRMD has a bright future ahead.
This stock has an A rating in my Portfolio Grader.
Navios Maritime Partners (NMM)
When you hear about inflation, it’s always linked to the global supply chain issues. That’s because lack of supply in the face of increasing demand usually causes prices to rise. And while post-pandemic demand surged, the supply chain is still getting back on its collective feet.
One of the biggest challenges here is dry bulk and container shipping. Dry bulk means anything that isn’t wet – steel, grain, ores, etc. And container shipping is what all those boxes of all those goods we buy online day after day come in. NMM owns ships that carry both dry bulk and containers.
This is usually a cyclical industry and its dividend typically soars when business is slow and drops when business booms. Today, NMM’s dividend is 0.75%. Not surprisingly, its stock has soared 132% YTD, yet it still trades at a P/E below two. There are still good times ahead for NMM.
This stock has an A rating in my Portfolio Grader.
Small-Cap Stocks to Buy: Perion Network (PERI)
Do you ever look at a product on the web and then you pull up another site and the advertising for that product or similar products seems to follow you all the way across your browsing and social media?
Well, that’s the core of what PERI does. It builds ad platforms that are integrated into user experience through their customers’ marketing channels. It not only makes the ads and the iterations that follow a user around, but it makes the software that integrates into the marketing and database platforms. That’s a complex and advanced dance.
Its effectiveness is paying off. PERI stock has risen 68% YTD. Its current market cap is about $750 million and yet it trades at a current P/E of 25.
This stock has an A rating in my Portfolio Grader.
Ryerson Holding Corp (RYI)
While the digital world continues to expand and accelerate, our physical world sometimes struggles to keep up. We need more warehouses so that e-commerce can move about easily, new server farms, as well as new smart buildings and homes for hybrid work schedules.
We’ve seen the death of the shopping mall, but new retail spaces have been reimagined. All this takes Old School materials like steel and aluminum. And that’s what RYI has been doing since 1842. It’s a value added processor and distributor of industrial metals materials across a variety of industries. It operates in North America as well as China. And the new infrastructure spending will be a boon for years to come.
RYI stock is up 79% YTD, yet it trades at a current P/E below six. And it has a 1.4% dividend. It may not be sexy, but it performs.
This stock has an A rating in my Portfolio Grader.
Small-Cap Stocks to Buy: Insteel Industries (IIIN)
Like RYI, IIIN is all about the physical world. It’s the world’s largest maker of steel wire reinforcing products. What does that mean? If you’ve ever seen a cross section of a bridge or building, you will see the steel rods that run through the concrete to reinforce it. The typical term for it is “rebar.”
This is what IIIN does. And it’s not just making one type of steel wire. Each project needs its own type of rebar, depending upon the specific challenges that are being addressed. Their work must be quality too, since these products help keep bridges and buildings from collapsing. People’s lives are at stake.
IIIN has been doing this since 1953 and didn’t get to be the biggest player by hiding in the shadows. It’s the gold standard.
The stock has gained 74% year to date but it has a current P/E of just 11. And its $750 million market cap makes it one of the small-cap stocks with a big future.
On the date of publication, Louis Navellier has positions in IRMD, NMM, PERI, and RYI in this article. 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.
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