7 Top Small-Cap Stocks to Buy With the World In Turmoil

  • Hope Bancorp (HOPE) — Bank of Hope is one of the leading Asian American banks in the United States and a leader among small-cap stocks.
  • Knowles Corporation (NYSE:KN) — Knowles looks undervalued based on its price-earnings and price-book ratios.
  • Barnes Group (NYSE:B) — Barnes has been posting strong earnings beats lately.
  • Ultra Clean Holdings (NASDAQ:UCTT) — Ultra-Clean recently reported record earnings.
  • ExlService Holdings (NASDAQ:EXLS) — In March, EXLS updated its 2022 earnings guidance to $5.35-$5.60, well above analyst expectations.
  • Matador Resources (NYSE:MTDR) — Two analysts recently increased estimates on Matador.
  • Insight Enterprises (NASDAQ:NSIT) — Insight’s earnings growth is expected to remain strong.
a ticker board that says "SMALL CAP" among various ticker increases. represents small-cap stocks to buy

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With the world in turmoil, highlighted by the Russian invasion of Ukraine, stock market uncertainty is running high. Small-cap stocks, which have not outperformed for a while, continue to struggle. For the year to date, the iShares Russell 2000 ETF (NYSEARCA:IWM) returned -9% while the SPDR S&P 500 ETF (NYSEARCA:SPY) returned -5%.

Large- and mid-cap stocks may be outperforming because investors are concerned that higher interest rates, which is upon us, could choke off financing for smaller companies.

However, small-cap stocks have outperformed large-caps over longer periods of time. Craig Israelsen, Ph.D. found that over the last 95 years, the yearly return for small-cap U.S. stocks is 11.31% versus a return of 10.29% for large-cap stocks.

Some pundits think that small-cap companies should outperform in the near future, given that there is a strong effort by manufacturing companies to return their production to the U.S. This would change the global supply chain. The current method of manufacturing wherever it’s cheapest and shipping the goods to the U.S. and other countries seems to be melting under the heat of geopolitical events.

A higher degree of economic activity, especially in the manufacturing sector, should benefit smaller companies in the U.S.

The SPDR Portfolio S&P 600 Small Cap ETF (NYSEARCA:SPSM) is a great small-cap ETF, and a place to go to look for stocks to buy. It has an estimated growth rate of 13.9%, and an estimated price-earnings ratio of 12.7%. This puts the price/earnings to growth ratio at below 1, a reasonable valuation.

HOPE Hope Bancorp $15.48
KN Knowles Corporation  $19.69
B Barnes Group $38.23
UCTT Ultra Clean Holdings $36.36
EXLS ExlService Holdings $146.63
MTDR Matador Resources $52.98
 NSIT Insight Enterprises $102.07

Hope Bancorp

A customer makes a transaction at a bank

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Hope Bancorp (NASDAQ:HOPE) is the bank holding company for Bank of Hope. It provides banking services for small- and medium-sized businesses and for individuals in the United States. And with $17.2 billion in assets, Bank of Hope is one of the leading Asian American banks in the United States.

Bank of Hope serves multi-ethnic customers through its 54 full-service branches across nine states. The bank also has a presence in three additional states. Its branches are in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, and Alabama.

Over the last year the company generated diluted earnings of $1.66 per share and has a current price/earnings ratio under 10. Earnings are expected to grow by 4.2% in the coming year, from $1.67 to $1.74 per share, and there could be upside surprises to reward investors, with interest rates climbing.

Knowles Corporation

A photo of the Knowles logo on a sign.

Source: Sundry Photography/ShutterStock.com

Knowles Corporation (NYSE:KN) serves the consumer electronics, communications, medtech, defense, electric vehicle and industrial markets. The company is a market leader and provides advanced microphones, speakers and other products all over the world. 

The stock price has been in and around the low $20’s for the last six months or so, and Simplywallst.com reports that the company’s stock is undervalued with an estimated fair value of $52.05. The site also shows KN as a good value situation based on a P/E ratio of 12.7 compared to the U.S. electronic industry average of 17.2.

Knowles also offers good value based on its P/B ratio, which is 1.3. This compares to the U.S. Electronic Industrys average of 2.1. It may be a smart buy here.

Barnes Group

tech stocks

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Barnes Group (NYSE:B) has two operating segments — industrial and aerospace. B stock provides products, solutions and industrial technologies in the U.S. and internationally. The company is active in robotics, designing and developing robotic grippers, advanced end-of-arm tooling systems, sensors, and other components for intelligent solutions.

As reported by Nasdaq.com, on Feb. 18, Barnes Group reported that its fourth-quarter earnings of 55 cents per share beat the Zacks consensus estimate of 46 cents per share. This performance is an earnings surprise on the upside of 19.57%. The previous quarter, its earnings estimates were 50 cents per share; it actually earned 55 cents per share, beating its estimate by 10%.

The company has performed well and could be looked at as a stock to buy in the small-cap asset class.

Ultra Clean Holdings

a close up image of a semiconductor

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Ultra Clean Holdings (NASDAQ:UCTT) develops and supplies critical subsystems, and other systems and parts for the semiconductor industry. Ultra supplies its customers with an integrated outsourced solution for subassemblies and high-precision manufacturing. Its Services Division offers chamber parts cleaning and coating, as well as other analytical services.

In February, Ultra Clean announced that a record-fourth quarter performance made it possible for it to have had over a $2.0 billion revenue for the past year, 2021, and expected 2022 to be another growth year. It could bring investors along for the ride.

Jim Scholhamer, CEO, said, “We strategically deployed capital to meet capacity requirements and will continue to invest in our business to meet ongoing demand while strengthening our balance sheet to capitalize on future growth opportunities.”

ExlService Holdings

An image of a person typing at a kayboard with data overlaid, hand pointing toward data

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ExlService Holdings (NASDAQ:EXLS) is a business evolution partner, and tailors solutions that make the most of data; EXLS is dedicated to enabling its customers to make better business decisions by driving more intelligence into its customers’ digital operations. This is done by scaling the use of artificial intelligence; better use of data science; and utilizing change management.

In March, EXLS updated its FY 2022 earnings guidance to $5.35-$5.60 for the year; this compares with the to the Thomson Reuters consensus estimate of $4.98.

The company also issued revenue guidance of $1.28 billion-$1.31 billion; this compares with the consensus revenue estimate of $1.25 billion. That kind of growth is worth keeping an eye on.

Matador Resources

oil stocks: stacks of oil barrels

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Matador Resources (NYSE:MTDR) is another stock that should be considered as one of the top small-cap stocks to buy.

In a research report issued on March 23, Capital One Financial increased its first-quarter earnings estimate for this stock to $2.16 per share, up from its earlier forecast of $1.84 per share. Also, on Wells Fargo increased their price target from $55 to $66 and assigned the stock an “overweight” rating.

Matador is an independent energy company active in exploration, development, production, and acquisition of oil and natural gas resources in the U.S. It emphasizes on oil and natural gas shale, along with other unconventional activities.

With oil prices rising, this could be an excellent way to capitalize.

Insight Enterprises

communication technology for internet business. global world network and telecommunication on earth

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Insight Enterprises (NASDAQ:NSIT), through its software, helps businesses of all sizes – small, medium, up to world-wide institutions, such as governments and school health care organizations – to define, architect and manage its intelligent technology solutions.

On Feb. 10, it released earnings for the quarter: $2.03 per share, beating consensus estimates of $1.98. Consensus analysts’ estimated earnings for the coming year is that Insight will grow by 9.65%, from $7.77 to $8.52 per share.

The stock should be considered for its industry exposure and its growth potential.

On the date of publication, Max Isaacman did not have (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.

Max Isaacman is an Investment Advisor Representative in San Francisco. He was a Merrill Lynch Representative and a Vice President of Lehman Brothers. His investment books were published by McGraw-Hill and Financial Times Press, including the first book on ETFs, How to be an Index Investor (McGraw-Hill, 2000). He wrote for the Emmy award-winning Website Minyanville.com. His email is exch13@aol.com.


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