For aggressive investors who are seeking maximum reward potential while understanding the risks involved in such endeavors, focusing on small-cap stocks trading at a discount may be an appropriate tactic given the aforementioned framework. Again, it’s not an approach everybody should take. However, for robust return potential without diving into exotic financial vehicles, this may be an enticing methodology.
Primarily, small-cap stocks to buy on the dip benefit from the concept known as the law of small numbers. Basically, it doesn’t take much “energy” to move a low-priced security from one threshold to another. In contrast, larger-capitalization names may require significant fundamental catalysts — such as incredibly robust earnings — to see conspicuously big gains.
Second, small-cap stocks trading at a discount enjoy a superior fundamental profile in that these names fly under the radar. However, once a news item or development jumpstarts their valuations, the wider public could get wind of the opportunity. The mad rush into said securities can spark mind-blowing rallies; hence, this segment’s appeal.
Still, you have to know what you’re getting into. Please note that the below small-cap stocks to buy on the dip are for aggressive investors only.
|OIS||Oil States International||$5.06|
|BKD||Brookdale Senior Living||$4.87|
|FSM||Fortuna Silver Mines||$2.52|
Oil States International (OIS)
Oil States International (NYSE:OIS) provides various services to the oil and natural gas industries. In particular, the company provides offshore and manufacturing products (such as drilling rigs and vessels), as well as well site services and downhole technologies.
In the trailing month since the close of the July 14 session, OIS has slipped 37%. That’s not an unusual erosion of performance in the hydrocarbon energy sector. A number of headwinds, including the release of crude oil from the Strategic Petroleum Reserve and inflationary pressures taking a bite out of demand led to the malaise.
Still, OIS is one of the small-cap stocks to buy on the dip because hydrocarbon volatility should prove only temporary. Essentially, the big catalyst for higher prices — Russia’s invasion of Ukraine and the shelving of major energy resource supplies due to the subsequent sanctions — remain a thorn on the sector’s side.
Brookdale Senior Living (BKD)
Brookdale Senior Living (NYSE:BKD) owns and operates retirement homes across the U.S. It also happens to be the largest operator of senior housing in this country with over 60,000 residents.
As with other small-cap stocks to buy on the dip, Brookdale has suffered significantly the myriad problems associated with the coronavirus pandemic. On a year-to-date basis, BKD is down 8% while over the trailing-year period, the security has tanked over 38%. Still, the underlying company makes for an interesting case among the small-cap stocks to buy on the dip.
You’re going to require patience as even on a trailing five-year basis, BKD is down 67%. However, according to the Pew Research Center, the baby boomer demographic was the largest living adult generation in the U.S. until millennials took over in 2019.
Still, as they age, the baby boomers have to live somewhere. Therefore, Brookdale Senior Living offers a solution to an ever-rising challenge.
A company that needs no introduction, GoPro (NASDAQ:GPRO) and its action cameras have revolutionized content creation. No longer are high-motion or complex footage the exclusive arena of major film studios. Instead, everyday individuals can be the star of their own high-octane YouTube channel.
While GoPro captured tremendous relevance back during the time of its initial public offering (June 2014), circumstances since the late summer of 2015 have not turned out well. Since its first public close, GPRO is down more than 85%. In the year so far, it’s already shed approximately 51%. A confidence-inspiring trade GPRO is not.
However, demand for experiences may help bolster GoPro as one of the small-cap stocks to buy on the dip. Prior to the Fourth of July weekend, many travel experts anticipated record traffic despite soaring gasoline prices. Therefore, it’s not much of a stretch to assume that such demand can spill over to the action camera arena, an area for which GoPro still commands incredible brand presence.
Fortuna Silver Mines (FSM)
A Canada-based precious metals mining company, Fortuna Silver Mines (NYSE:FSM) features operations in Argentina, Burkina Faso, Mexico and Peru. Primarily, Fortuna engages in the production of silver and gold minerals. On paper, the ridiculous weight of inflation and the subsequent loss of purchasing power should make FSM a no-brainer among small-cap stocks to buy on the dip.
Unfortunately, this paper thesis hasn’t translated well in the real world. FSM is a laggard, there’s no other way to put it. Shares are down nearly 22% on a trailing-month basis, while they’ve tanked nearly 36% YTD. Over the trailing year, FSM has staggered to a loss of 44%. Still, aggressive investors may want to add the company on their list of small-cap stocks to buy on the dip.
Mainly, it’s still possible that FSM could rise on the fear trade. With so many sectors imploding, it’s good to have some exposure to an investment tied to assets with intrinsic value. Moreover, inflation could worsen if the Federal Reserve panics if recessionary pressures start weighing more aggressively on economic stability.
Big Lots (BIG)
Big Lots (NYSE:BIG) is an an American retail company that features over 1,400 stores in 47 states. Similar to warehouse retail stores, Big Lots naturally caters to bulk purchases and, therefore, discounts via economies of scale. As such, the company is akin to Costco (NASDAQ:COST) without the membership fee (you can sign up for free at BigLots.com)
As I explained in an article for TipRanks, Costco facilitates one of the best and most practical mitigatory methodologies against inflation: buying in bulk non-perishable or long shelf-life items that you regularly buy anyways. That way, if you anticipate higher prices tomorrow, you can basically extract a discount by making the purchase today.
Still, the one advantage that Costco has against its peers is an average consumer base that makes well above the median household income. Still, with a YTD loss of almost 60%, BIG makes for an interesting case among small-cap stocks to buy on the dip for aggressive investors.
Charge Enterprises (CRGE)
As has been drilled into our heads for the last few years, electric vehicles are the future. Further, the military conflict in eastern Europe has incentivized many international policymakers to find an alternative to hydrocarbons. Such a dynamic only drives more relevance to EVs and related investments. And that brings us to a discussion about Charge Enterprises (NASDAQ:CRGE).
According to its website, Charge Enterprises delivers “seamless end-to-end solutions for EV charging infrastructure and 5G wireless intelligent networks.” Fundamentally, the idea undergirding CRGE makes more sense in some ways than betting on an individual EV manufacturing brand. With so many competitors in the space today, it’s difficult to know which ones will ultimately win out.
But charging? The buildout of infrastructure goes hand-in-hand with wider acceptance and integration of EVs. Yes, CRGE is down about 36% over the trailing month. However, it could be one of the small-cap stocks to buy on the dip for its longer-term relevance.
F45 Training (FXLV)
An Australian franchisor and operator of fitness centers, the Austin, Texas-based F45 Training (NYSE:FXLV) makes for the riskiest case among small-cap stocks to buy on the dip — at least as far as this list is concerned. First, you can look at the numbers. FXLV is down almost 25% over the trailing month and for the year so far, it has shed 68%.
But the other factor to consider is the deteriorating consumer economy. Inflation being sky high right now based on the latest consumer price index, households are incredibly incentivized to cut down their spending. Further, fitness-related names just haven’t done so well, such as former high-flyer Peloton (NASDAQ:PTON).
Still, an argument of necessity exists because research shows that among the people who gained unwanted weight during the pandemic, the average gain turned out to be 29 pounds. As well, people want to socialize due to two years of lockdowns and mitigation protocols. Perhaps an in-person fitness center program is just what consumers want.
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.
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