5 Small Caps You Need To Know
The small-cap stock sector is often the most lucrative niche in stock investing. These relatively small companies with market caps between $300 million and $2 billion are naturally volatile providing massive upside opportunity.
Along with the opportunity comes risk. These fast-growing small caps often are cash burning machines and operate with high debt loads during the initial phases.
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I have identified five small-cap stocks — including one that’s up 700% this year — that I think offer great risk/reward for the long-term investor.
Here are my five favorite small caps for the next 52 weeks.
1. TechTarget (Nasdaq: TTGT)
This $500 million-plus cloud-based content marketing company has soared over 40% this year. What triggered the surge is the company finally began to produce solid earnings after years trying to get traction. Guidance has also dramatically improved this year creating excitement for investors.
#-ad_banner-#As in most of these exploding small caps, shares have pulled back from the highs despite the doubling of adjusted earnings in the second quarter and growing gross margins. Price just got ahead of itself and consolidated, creating a compelling opportunity at the current levels.
Get long on a break above $20.00 per share with a $33.00 per share target and initial stops at $17.00 per share.
2. Redfin (Nasdaq: RDFN)
I love this high-tech real estate company. Despite shares being crushed over 40% lower in 2018, I firmly think Redfin’s is paving the path for complete disruption of the slow to change real estate sales model.
Revenue is growing at the company, but the CEO made the error of being bearish on the real estate market spooking investors.
Shares have just bounced off an all-time low and have set up to be a long-term bargain buy.
Look to enter in the $18.00 per share zone with a $32.00 per share. Initial stops make sense at $13.93 per share.
3. Spectrum Pharmaceuticals (Nasdaq: SPPI)
A just under $2 billion market cap biotech firm specializing in oncology and hematology drugs. Shares are higher by greater than 74% over the last 52 weeks but lower by 9% this year.
Less than expected results from the poziotinib indicator in phase 2 trials have continued to depress the stock price.
The recent selling climax shook out the weak hands, creating an ideal buying opportunity at $17.00 per share. Our target price is $30.00 per share with initial stops suggested at $13.93 per share.
4. Brinks (NYSE: BCO)
The $3.5 billion security and logistic company is best known for its fleet of armored vehicles. Shares are trading lower by around 10% in 2018, but the company’s metrics are on the upswing. The company saw a 25% increase in profits, 8% revenue growth, and constant currency revenue profit increased by 13% in its second quarter.
At the same time, Brinks is suffering from negative currency impact in South America. It was forced to take a one-time non-cash charge of $127 million or $2.47 per share against second-quarter earnings depressing the share price.
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I like the stock at $71.00 per share with a target price of $82.00 per share and an initial stop loss at $66.75 per share.
5. Intelsat Global (NYSE: I)
Trend traders rejoice with this small cap. Shares have been upward trending since February and have booked an astounding cryptocurrency style gains of around 700%!
Intelsat SA is a Luxembourg-based company that operates a satellite services business. Its customers are communications firms around the world. It also provides communications services to media companies, fixed and wireless telecommunications operators, data networking service providers for enterprise and mobile applications in the air and on the seas, multinational corporations and Internet services.
The surging stock price seems to contradict the fact that the company has $1.7 billion of debt but only $440 million or so in its coffers. Despite the debt, Intelsat was able to turn free cash flow positive in 2017, igniting the explosion in share price.
Recent success in issuing Senior Notes due in 2024 buys the company more years to pay off the debt and investors love this fact.
There is no doubt that Intelsat is a leader in a massive growth niche for the future. I would not be surprised should this stock gain another 100 to 300% over the next 36 months.
Getting long now at $27.00 per share with a target price of $75.00 per share. Initial stops are suggested at $19.00 per share or even lower depending on your risk tolerance. Expect volatility on the way higher!
Risks To Consider: Volatility is an inherent fact with small cap stocks. Be prepared to take losses and always diversify across the sector.
Action To Take: Consider adding one or more of the above stocks to your long-term, risk-embracing portfolio.