It remains to be seen how long the great rotation into small-cap stocks that began in July of this year will last. Since the start of August, the Russell 2000 index that is home to most small-cap securities that trade in the U.S. has declined 8%. That brings the Russell’s gain on the year down to 3%, trailing the performance of the benchmark S&P 500 index that is up 10% year-to-date.
Great rotation or not, there are many small-cap stocks worthy of a place in investors’ portfolios. A lot of small companies continue to post earnings that beat Wall Street targets and have stocks that outperform the broader market. Some small-cap stocks have achieved gains that trounce securities whose market capitalizations are more than 100 times larger. Here are three small-cap stocks to buy amid the great rotation.
UFP Technologies (UFPT)
With a market capitalization of only $2.44 billion, UFP Technologies (NASDAQ:UFPT) is a small-cap stock that trades on the Russell 2000 index. Based in Massachusetts and a growing concern since 1963, UFP Technologies makes medical devices and sterile packaging that are used in the healthcare space. Currently, the company employs 3,000 people and has annual sales of about $400 million.
While small, UFP Technologies has proven to be a mighty stock. Year-to-date, the share price is up 86%. In the last five years, UFPT stock has gained nearly 650%. Over the past 20 years, the stock has risen close to 40,000%. Those impressive returns have been driven by exceptional financial results. The company just reported second-quarter results that once again trounced estimates with revenue of $110.2 million versus $106.97 million that was forecast. EPS came in at $1.75 compared to consensus estimates of $1.53.
Owing to its small-cap status, only two Wall Street analysts currently cover UFPT stock.
Hawkins (HWKN)
Hawkins (NASDAQ:HWKN) is another mighty small-cap stock. The company, based in Roseville, Minnesota, currently has a market capitalization of $2.49 billion and fewer than 1,000 employees. It’s been in business since 1938, has 60 facilities in 27 states and generates annual sales of around $950 million. Hawkins makes specialty chemicals and ingredients found in food. Its chemicals are used in industrial applications and for water treatment, and its ingredients are used for nutritional purposes in food products.
Hawkins is a small, boring company that makes essential products. However, there’s nothing boring about its stock performance. In the last 12 months, HWKN stock has increased 133%, including a 70% gain this year. Through five years, the share price has risen 440%. Hawkins also regularly raises its dividend payment to shareholders, most recently increasing its distribution by 13% on August 2nd of this year. Hawkins now pays a quarterly dividend of 18 cents a share, giving the stock a yield of 0.60%.
Sprouts Farmers Market (SFM)
Sprouts Farmers Market (NASDAQ:SFM) continues to impress. The relatively small grocery store chain that has 413 locations in 23 states. It also has a market capitalization of $9.81 billion and annual sales of about $6 billion. Yet despite being dwarfed in size by much larger competitors, Sprouts Farmers Market continues to put up impressive financial results that have driven the stock to amazing gains in recent years.
Consider that SFM stock is up 94% this year and has risen 435% in the past five years. That’s an incredible performance by any measure. Like UFP Technologies, Sprouts Farmers Market, which specializes in natural and organic foods, has seen its stock driven higher by strong earnings. The company recently reported Q2 EPS of 94 cents on sales of $1.89 billion. That topped analysts’ consensus estimates of 78 cents in earnings and $1.84 billion in revenue.
SFM stock jumped 13% higher after the company’s latest print.
On the date of publication, Joel Baglole 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.
