Small-cap stocks have emerged in 2024 after many years in the wilderness. The Russell 2000 is up nearly 11% in the past month through July 31. While it’s hard to know how small-cap stocks with low debt have performed over this period, investors are undoubtedly paying more attention to them.
“‘I think the narrative has changed,’ said Eric Kuby, chief investment officer at North Star Investment Management Corp, which specializes in small-cap stocks. ‘I’m hoping … this jump over the last week is really just the beginning of what could be a very long, multi-year period of time where small caps could make up a lot of ground,” Reuters reported the portfolio manager’s comments in mid-July.
How does one know whether the 2024 performance of small-cap stocks is real or imagined? A Reddit post from late May tells me it’s the former. The headline stated Small Cap Value has never been more brutal.
If ever there were a buy signal, that would be it.
While value is hard to pin down, my idea of value is those stocks that trade for reasonable multiples and have fortress-like balance sheets.
Here are my three small-cap stocks with low debt to buy for growth at reasonable prices.
Hudson Technologies (HDSN)
Hudson Technologies (NASDAQ:HDSN) is the smallest of the three small-cap stocks, with a market capitalization of $388 million. It has net cash of $4.3 million based on a total debt of just $6.23 million against $10.6 million in cash and cash equivalents on its balance sheet.
This is the first time I’ve ever heard of Hudson Technologies, so I’m just as naive as you are about what it does to make money.
As best I can tell, the New York-based company sells products and services to reduce greenhouse gas emissions. It focuses on the HVACR (heating, ventilation, air-conditioning and refrigeration) industry.
“One of the largest refrigerant selections in the country, featuring our certified reclaimed Emerald® Refrigerants,” its website states.
The company’s results in 2024 aren’t going to be as good as last year, which is why its stock is down nearly 40% year-to-date. However, as its CEO stated in its Q1 2024 press release, the business will improve as HFCs (hydrofluorocarbons) are phased out.
“… [I]t is important to reiterate our confidence that the phasedown of HFC will ultimately move pricing higher, accelerate reclamation adoption and drive enhanced profitability in our business,” CEO Brian Coleman stated.
Monarch Casino & Resort (MCRI)
Monarch Casino and Resort (NASDAQ:MCRI) is the second largest of the small-cap stocks, with a market cap of $$1.46 billion. It has a net cash of $19.3 million based on a total debt of just $20.2 million against $39.5 million in cash and cash equivalents.
Although I’m not a gambler, the company has two casinos in Reno, Nevada and Blackhawk, Colorado. They seem to do pretty well.
Atlantis Casino Resort Spa in Reno has 61,000 square feet of casino space, 824 rooms and a 30,000-square-foot spa.
“The casino features approximately 1,200 slot and video poker machines; approximately 38 table games, including blackjack, craps, roulette and others; a race and sports book; a 24-hour live keno lounge and a poker room,” its website states.
Monarch Casino Resort Spa in Colorado has 64,000 square feet of casino space, 516 guest rooms and a rooftop pool and spa. The casino features over 950 slot machines and 24 table games.
The best thing about MCRI is its very healthy adjusted EBITDA (earnings before interest, taxes, depreciation) margin of 34.3%. In Q2 2o24, that meant an EBITDA profit of nearly $44 million on record second-quarter revenue of $128.1 million.
Patria Investments (PAX)
Patria Investments (NASDAQ:PAX) is the largest of the small-cap stocks with a market cap of $1.98 billion. It has a net cash of $23.5 million based on a total debt of just $15.6 million against $39.1 million in cash and cash equivalents.
Patria is a leading alternative asset manager in Latin America. With over 35 years of experience, it currently has more than $32 billion in assets under management. The company provides its clients with private equity, infrastructure, credit, real estate, public equities and global private markets investments.
PAX stock has not done well. It is down YTD over the past year and nearly 35% over the past five years.
The business seems to be doing okay. In Q1 2024, it grew its fee-related earnings by over 13% to $35 million, accounting for 58% of its $60.6 million in fee revenue in the quarter, up from 56% in Q1 2023.
At the same time, it expects to raise $5 billion in capital in 2024, with about 22% already completed. Excluding acquisitions, it’s added $5.1 billion in assets under management in the last 12 months.
Trading well off its February 2021 highs in the $20s, buying below $15 makes sense for buy-and-hold investors.
On the date of publication, Will Ashworth 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
