After running into some February jitters earlier this week, the market may be poised for stronger returns, which then incentivizes the narrative for hidden-gem stocks. For whatever reason, these ideas just simply don’t feature on Wall Street’s radar. However, if I’m reading the tealeaves correctly, they could be due for some serious gains.
Now, before we dive into the contrarianism that is hidden-gem stocks, a word of warning. I extracted these ideas via a combination of disappointing trailing-52-week performances and overall optimistic analyst ratings. To be sure, opinions are exactly that – opinions. Everybody has one. And a case can be made that the print in the charts is the end-all, be-all.
On the flipside, you generally don’t get rich off ideas that everybody else believes will win (unless we’re talking cryptocurrencies). By getting into flea-market finds early, you could potentially grab massive winners before the public – even the Street – catches on.
And on that fine note, below are hidden-gem stocks ready to ride a massive market wave.
Himax Technologies (HIMX)
A fabless semiconductor manufacturer, Himax Technologies (NASDAQ:HIMX) provides display imaging processing technologies to consumer electronics specialists. As well, Himax offers solutions for myriad other applications, including those found in the automotive sector. With so much emphasis placed on the chip-building component of the tech value chain, it’s odd to see HIMX suffer so much red ink. Still, this dynamic also makes HIMX one of the hidden-gem stocks to consider.
For example, Himax features substantial acumen in microdisplay solutions, such as embedded projectors in smartphones, camcorders, and head-mounted displays (smart glasses). According to MarketsandMarkets, this sector reached a valuation of $1.1 billion in 2023. Further, analysts estimate that the ecosystem could reach a valuation of $3.2 billion by 2028. If so, that would represent a compound annual growth rate (CAGR) of 23.7%.
Making the case all the more attractive, HIMX trades at a trailing-year earnings multiple of 18.44X. That’s much lower than the sector median print of 28.1X. Also, since August of last year, analysts rated shares a buy, with the most recent target hitting $7.
CarParts.com (PRTS)
When you look at the chart performance of online automotive parts store CarParts.com (NASDAQ:PRTS), the storyline is absolutely brutal. Sure, PRTS recently enjoyed a solid day during the midweek session. However, since the beginning of the year, it’s down almost 19%. And in the past 52 weeks, longtime shareholders have endured a loss nearing 64%.
Still, that might not be the end of CarParts.com. Sure, with the improving economy, people may be more tempted to buy a new replacement vehicle rather than repair their current one. However, circumstances might not be that simple. For one thing, during much of 2023, the personal saving rate increased as high inflation and high interest rates took their toll.
Yes, it’s true that the jobs market has been printing impressive numbers. However, mass layoffs are still occurring. Given the delicate nature of the economic recovery, people are hesitant to buy big-ticket items. Cynically, this dynamic could help PRTS become one of the top hidden-gem stocks.
Analysts peg shares a unanimous strong buy with a $4 price target, implying almost 52% upside potential.
Pan American Silver (PAAS)
As a precious metals miner, Pan American Silver (NYSE:PAAS) will likely always attract a certain segment of the investment market. With inflation remaining a stubborn issue that has dogged the Federal Reserve, it’s possible that PAAS stock could benefit from the fear trade. By that, I’m referring to securities that may rise under a devalued dollar.
Further, even without much modulation of monetary policy, PAAS appears to enjoy a fundamental backdrop. For instance, with the jobs market continuing to astound onlookers, the implications are quite clear: more money continues to chase after fewer goods. If this dynamic sustains itself, PAAS may eventually shoot higher, making it one of the hidden-gem stocks.
However, Pan American represents one of the riskier ideas. It’s down 22% on a year-to-date basis. Not only that, technical signals point to further downside ahead. That said, on the contrarian side, PAAS trades at only 0.92X tangible book value, below 61% of its peers.
Finally – this is the big one – analysts rate shares a unanimous strong buy with a $21.30 price target. This estimate calls for 72% upside potential.
On the date of publication, Josh Enomoto 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.
