- Today we’re looking at some micro-cap stocks to buy now and go long on hope.
- Apollo Medical (AMEH): Leadership has its privileges.
- Protagonist Therapeutics (PTGX): Behind solid execution comes long-term success.
- RadNet (RDNT): Rinse and repeat performance is approaching.
- Avid Bioservices (CDMO): Stabilization outlook is likely.
- Celldex Therapeutics (CLDX): It’s a technical thing.
- Castle Biosciences (CSTL): It’s a spending thing.
- MYR Group MYRG (MYRG): A true locomotive with a bunch of momentum.
Finding seven micro-cap stocks to buy for the long term, in the end, relies on guesswork. While research helps, your overall success is more of a number’s game. To increase the odds of success, I find it necessary to eliminate as many question marks as possible.
A quick way of doing this is by leveraging the information that is already available.
Today I compiled my list of micro-cap stocks to buy simply by picking winners from the top stocks of the iShares Micro-Cap ETF (NYSEARCA:IWC). This is a strategy I follow almost in any investment sector or field I chase. I don’t bother going too deep down the well of the vertical in question. The deeper you go, the murkier the stories become.
Moreover, I will also rely on a lot of short- and long-term chart clues. There is a bunch of information there that may be obvious from research. They say that “price is truth” so I definitely make it a habit to explore it.
So without further ado, here are the top micro-caps for investors to keep their eye on.
|MYRG||MYR Group MYRG||$83.66|
Apollo Medical (AMEH)
There is a good reason why Apollo Medical (NASDAQ:AMEH) is the largest of the IWC stocks. It sports a legitimate profit and loss statement that could be the envy of large companies. Sadly, a few weeks ago AMEH stock suffered a significant technical setback. When it lost the $35 level, it may have triggered a fresh bearish pattern.
But, there should be support lurking not too far below. Apollo stock is approaching the breakout neckline from last summer. Such prior breakout lines tend to slow stocks down. Therefore, it is likely it will find buyers there to help stabilize it short term. Longer term, the team seems to be firing on all cylinders. Judging by the report cards there aren’t any flagrant fouls there.
In its first-quarter earnings, the team continues to report a strong revenue growth — and strategic acquisition initiatives to boot. The company has earned enough benefit of doubt to be on my list of micro-cap stocks to buy. Moreover, last year it generated $73 million in cash from operations. That’s an important fact in a rising-rate environment.
Protagonist Therapeutics (PTGX)
Investors in stocks like Protagonist Therapeutics (NASDAQ:PTGX) must have one of two major characteristics — either a strong stomach to withstand the ups and downs of the news flow or extremely strong conviction in the eventual success of the team. Sometimes it’s about the science and the good it can do.
Human nature is to want to contribute to something we think is doing good, even if by way of owning shares. Long term, the reason to own Protagonist relies on hopes of a home run. Investors have all the right to hang on to that thesis until either it happens or the team gives up.
While Protagonist Therapeutics has had its downs, most recently there was some good news from a phase-2 study.
Sadly, the exuberance is hard to spot on the chart. Today’s bet on owning this stock has two foundations. The first comes from the optimism that the team will find medical success. And the second is that the stock will in the meantime experience another spike. The most recent setback took it back to base, so there should be buyers there waiting to rinse-and-repeat their last wins. There were three prior bounces — in June of 2017, again in 2018 and also the pandemic.
Patience will be an important virtue for these investors.
Investors are currently leery of every headline. Even when it’s good news, they just are refusing to party. Therefore, rallies don’t last and RadNet (NASDAQ:RDNT) just got a taste of this nasty habit. Management reported strong earnings, but the stock still fell. It could be the drag from crashing indices that caused it, since the Russel 2000 also fell 4% Monday.
It wasn’t the quality of the results that caused it, because RadNet did better than forecasts. It even guided forward more optimistic outlooks. Nevertheless, investors still sold it down 4% along with the rest of the collapsing indices.
Luckily for long-term investors, the chart shows some good news.
This most recent RDNT stock drop brings it into a zone that has been pivotal since 2018. More often than not, such areas act as support, so there could light at the end of this 52% correction. If the support holds, they could rinse and repeat at least a third of the summer rally. According to TradingView, the net income growth is progressing well in spite of a tepid top line. This means that management is learning to be more efficient at doing their thing.
Those who bought it at the bottom in 2018 are still up 80% on their investments.
Avid Bio-Services (CDMO)
When Avid Bio-services (NASDAQ:CDMO) stock lost $22, then $18 per share, it triggered two bearish patterns. The downside targets of each of those spells even more trouble for its investors. However, as Avid nears $9 per share, it will likely find buyers. Those levels were pivotal in 2020 for a monstrous 285% rally.
I am not suggesting that it will repeat, but I do think there is support below $10 per share. The real reason I would put this on the list of micro-cap stocks to buy is more about fundamentals. Avid’s P&L is impressive enough already, so investors can afford to be patient with it. This is especially true since it turned a profit in 2021.
Their cash from operations is now a respectable $31 million, just in time for higher rates. Companies who don’t generate cash like this will struggle to borrow in coming months. The Federal Reserve’s war on inflation will make sure of that.
Investors who stuck by CDMO stock from the 2018 Christmas crash are still up 190%, even after this 65% drop.
Celldex Therapeutics (CLDX)
To be honest, my next pick has more of a technical flare than a long-term fundamental thesis. The Celldex Therapeutics (NASDAQ:CLDX) stock has the opportunity to maintain a sharply rising channel. Its first task however is to hold above $25 per share. Else, there would be a technical setback that could break the momentum.
So it may be best to wait it out until it becomes clearer how investors want to finish the week. The financial metrics for this stock won’t be of help. The long-term optimism is based purely on potential future successes. Therefore, investors must do more due diligence on their own to fill the other side of this equation.
My shallow dive into its business revealed recent disappointment from earnings reports.
However, the stock is a wildcard that could end up delivering a few super-spikes in the next few years. I would contend that investors who venture into this micro-cap need to wear the occasional trader hat. This is a stock I would not hesitate to trade for fast profit. Conversely, I would quickly stop out if it fails to hold support.
Castle Bio-sciences (CSTL)
Castle Bio-sciences (NASDAQ:CSTL) stock has been falling almost incessantly lately, but much of this comes from a current theme on Wall Street. Investors these days have little appetite for stocks that have a high growth trend but also high spending habits. Sadly for Castle, its P&L fits this bill to a tee. So it is not a surprise to see it fall after its earnings report this week.
Beating revenues is no longer enough, investors have other expectations in mind. Take Upstart (NASDAQ:UPST) for example. Yesterday it crashed 40% even though it grew its business more than 150%. CSTL suffered a similar fate. It too grew revenues, even if only by 17%. But investors were perhaps looking for better earnings per share. They should have known better, since Castle doesn’t have a habit of outperforming on earnings.
In any case, the stock is now approaching a potentially strong support zone. When a stock goes back to its all-time base, it is likely to find suitors there. Moreover, judging by its revenue growth, I would not fret its profitability levels. At this stage, management should focus more on expanding the P&L without skimping too much.
So far they’ve grown their revenues six-fold in five year. They can always tweak their spending levels when they hit certain plateaus.
MYR Group (MYRG)
I opened my list of micro-cap stock to buy with their leader. And I will close it with a cranker. MYR Group (NASDAQ:MYRG) stock looks like a locomotive in spite of its 17% correction in November . The longer-term chart shows an incredibly strong ascending channel. This suggests that investors are willing to stick by it through thick and thin.
This is for good reason because the evidence of strength is also evident in their financial metrics. The top and bottom lines of the P&L show steady and respectable improvements. With such consistency, investors can focus more on the upside potential without much worry.
In addition, last year it delivered $137 million of cash from operations. This team knows how to execute on plans.
I don’t need to be an expert in the field to recognize this. Unfortunately, there is a bit of bad chart news. MYRG stock recently lost the Feb. 25 support. Unless the bulls can recover it quickly, the stock could target $64 per share. There will be support there too, in case this bearish scenario happens. The longer-term charts show that it could afford to lost much more and still maintain a bullish trend.
On the date of publication, Nicolas Chahine 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.