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In this article, we discuss 10 best small-cap stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Small-Cap Stocks To Buy Now.
Small-cap stocks are often considered riskier but also more profitable than large-cap stocks. Many small-caps are younger firms with meaningful growth potential. The market capitalization of these companies ranges from $300 million to $2 billion. Unlike large-caps, small-caps did not reach a new low in the third quarter of 2022. For Q3 2022, the small-cap Russell 2000 Index dropped 2.2%, ahead of its large-cap counterpart, the Russell 1000 Index, which was down 4.6% during the same period.
Lori Calvasina of RBC Capital Markets told CNBC on November 2 that 2021 was a rough year for small-caps and they had already priced in a lot of the dismal economic factors the market is currently facing. The valuations of small-caps are also quite attractive as compared to the S&P 500, which is inflated in value due to the mega-cap growth constituents. She is betting on small-caps in this environment, noting that there are cheap opportunities in the small-cap cyclical space.
Jill Carey Hall, Bank of America head of mid-cap strategy, joined CNBC’s 'Closing Bell' at the beginning of October, where she noted that small-caps generally provide services rather than goods, which tend to hold up better during times of economic uncertainty. She also claimed that small-cap stocks may continue to outperform large-caps, and they look even cheaper right now as they trade at 11-times their forward earnings. Small-caps also tend to perform relatively better during recession economies, as per Hall, who cited historical averages.
While investors usually rush to seek refuge in firms like Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA) during market uncertainty, it is a good idea to review small-caps, which tend to perform better and have higher growth potential.
Our Methodology
We have selected the following small-cap stocks based on market capitalizations ranging from $300 million to $2 billion as of November 3. We have shortlisted the stocks that have solid growth fundamentals, positive analyst ratings, and the capacity to drive resilient returns in the future. The hedge fund sentiment was assessed from Insider Monkey’s database of elite hedge funds, tracked as of the second quarter of 2022.
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Best Small-Cap Stocks To Buy Now
10. VIZIO Holding Corp. (NYSE:VZIO)
Number of Hedge Fund Holders: 8
VIZIO Holding Corp. (NYSE:VZIO) is a California-based company that provides smart televisions, sound bars, and accessories in the United States. VIZIO Holding Corp. (NYSE:VZIO) offers SmartCast, a Smart TV operating system, which supports streaming apps such as Amazon Prime Video, Apple TV+, Discovery+, Disney+, HBO Max, Hulu, Netflix, Paramount+, Peacock, and YouTube TV. VIZIO Holding Corp. (NYSE:VZIO) is one of the best small cap stocks to buy now.
On October 6, VIZIO Holding Corp. (NYSE:VZIO) finished its upfront season with more than $200 million in direct advertising commitments from agency holding companies, brands, and studios, representing a 100% year-over-year raise. The growth in advertising revenue for Vizio Ads can be ascribed to multiple market factors such as audience migrations from linear to streaming, improved targeting, and direct-to-device advertising offers. VIZIO Holding Corp. (NYSE:VZIO)’s advertising segment grew 71% compared to the prior-year quarter in Q2 2022, and it added 243 new advertisers during the quarter ending June.
Stephens analyst Nicholas Zangler on August 29 wrote a note advocating for his 2022 "Best Idea", VIZIO Holding Corp. (NYSE:VZIO), suggesting 20 reasons to own the stock. He highlighted the company's "reputable brand name and deep, long-standing relationships with key retailers" and the ongoing increase in CTV ad spending. His "conservative outlook" for FY25 suggests VIZIO Holding Corp. (NYSE:VZIO) could generate $280 million in adjusted EBITDA, up from his estimate of $50.7 million in FY22.
According to Insider Monkey’s data, Israel Englander’s Millennium Management is the leading position holder in VIZIO Holding Corp. (NYSE:VZIO) as of the end of June 2022, with 493,600 shares worth $3.36 million.
Like Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA), VIZIO Holding Corp. (NYSE:VZIO) is one of the best stocks to consider for a balanced portfolio.
Here is what Argosy Investors has to say about VIZIO Holding Corp. (NYSE:VZIO) in its Q1 2022 investor letter:
“Reviewing Vizio (NYSE:VZIO), we purchased it quite recently and it has declined precipitously in our brief period of ownership. They have an explicit strategy to sacrifice gross margins from their TVs to further develop the audience for their smart TV offering, a competitor to Roku. I purchased the shares expecting the thesis to play out over a number of years, so I intend to monitor the company and its results as we move forward. Their first quarter results reflected strength in their Platform (Smart TV) segment, which will be their primary source of profit going forward. Further, the news that Netflix and other streaming companies are considering subscriptions that include advertising is positive news. In some ways, what is old is new again, as this development is somewhat of a return to the dual-revenue-stream model cable TV channels use. The shift towards more streaming programming including advertisements is a positive for Vizio, since they may be able to monetize the ads directly or indirectly. I’ll keep you posted on their progress.”
9. Apollo Medical Holdings, Inc. (NASDAQ:AMEH)
Number of Hedge Fund Holders: 11
Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is a California-based company focused on proprietary health management through a healthcare delivery platform, which is physician-centric and technology-led. On October 5, Apollo Medical Holdings, Inc. (NASDAQ:AMEH) announced that it had entered into an agreement to acquire nine primary care clinics in Las Vegas, Houston, and Fort Worth, operating under the Valley Oaks Medical Group name. Apollo Medical Holdings, Inc. (NASDAQ:AMEH) expects to close the transaction by the end of the fourth quarter of 2022 and will finance the transaction with cash.
On September 21, William Blair analyst Ryan Daniels assumed coverage ofApollo Medical Holdings, Inc. (NASDAQ:AMEH) with an Outperform rating and no price target. The analyst believes that Apollo Medical Holdings, Inc. (NASDAQ:AMEH)’s "deeply experienced, physician-led leadership team is truly among the best in class in the advanced primary care space." He also thinks that Apollo Medical Holdings, Inc. (NASDAQ:AMEH)’s operating model provides a "strong value proposition to all three key constituents in the healthcare value chain." The company has "myriad opportunities" to generate organic growth, contended the analyst.
According to Insider Monkey’s data, 11 hedge funds held stakes worth $49 million in Apollo Medical Holdings, Inc. (NASDAQ:AMEH) at the end of Q2 2022, compared to 11 funds in the prior quarter worth $42 million. Steven Ng and Andrew Mitchell’s Ophir Asset Management is the largest position holder in the company, with 166,846 shares valued at $30 million.
8. CSW Industrials, Inc. (NASDAQ:CSWI)
Number of Hedge Fund Holders: 12
CSW Industrials, Inc. (NASDAQ:CSWI) is a Texas-based diversified industrial company that operates through three segments – Contractor Solutions, Engineered Building Solutions, and Specialized Reliability Solutions. On October 4, CSW Industrials, Inc. (NASDAQ:CSWI) announced the deployment of $57.8 million to acquire Cover Guard, AC Guard, and Falcon Stainless to expand offerings in HVAC/R and plumbing end markets. The deals are forecasted to be accretive to EPS in the first full year of ownership. It is one of the best small-cap stocks to buy.
On October 14, CSW Industrials, Inc. (NASDAQ:CSWI) declared a $0.17 per share quarterly dividend, in line with previous. The dividend is payable on November 14, to shareholders of record on October 31.
Barrington analyst Christopher Howe on August 22 raised the price target on CSW Industrials, Inc. (NASDAQ:CSWI) to $157 from $153 and reiterated an Outperform rating on the shares. For the rest of FY2023, CSW Industrials, Inc. (NASDAQ:CSWI) expects to have resilient revenue growth across its segments, the analyst wrote in a research note. He noted that the "predictable nature" of CSW Industrials, Inc. (NASDAQ:CSWI)’s Contractor Solutions segment, paired with improvement in its other segments, will result in consistent cash generation.
According to Insider Monkey’s Q2 data, 12 hedge funds were long CSW Industrials, Inc. (NASDAQ:CSWI), with collective stakes worth $30.3 million, compared to 13 funds in the prior quarter worth $29.8 million. Charles Montanaro’s Montanaro Asset Management is the largest position holder in the company, with 95,000 shares worth nearly $10 million.
7. Akero Therapeutics, Inc. (NASDAQ:AKRO)
Number of Hedge Fund Holders: 19
Akero Therapeutics, Inc. (NASDAQ:AKRO) was incorporated in 2017 and is headquartered in South San Francisco, California. It is a cardio-metabolic nonalcoholic steatohepatitis (NASH) company, focused on the development of medicines for restoring metabolic balance and improving overall health.
On September 13, Evercore ISI analyst Liisa Bayko upgraded Akero Therapeutics, Inc. (NASDAQ:AKRO) to Outperform from In Line with a price target of $50, up from $10. Akero Therapeutics, Inc. (NASDAQ:AKRO)’s FGF21 inhibitor, EFX, delivered a "statistically significant" win on primary endpoints of NASH resolution and fibrosis improvement, the analyst told investors in a research note. Given the limited size and duration of the study, this bodes well for the medicine in the future phase studies, the analyst contended.
According to Insider Monkey’s data, 19 hedge funds were long Akero Therapeutics, Inc. (NASDAQ:AKRO) at the end of the second quarter of 2022, up from 13 funds in the earlier quarter. Alkeon Capital Management is the biggest stakeholder of the company, with 2.6 million shares worth $24.75 million. It is one of the best small-cap stocks to buy now according to elite hedge funds.
6. Arconic Corporation (NYSE:ARNC)
Number of Hedge Fund Holders: 19
Arconic Corporation (NYSE:ARNC) manufactures and distributes aluminum sheets, plates, extrusions, and architectural products in the United States, Canada, China, France, Germany, Hungary, Russia, the United Kingdom, and internationally. In the third quarter of 2022, Arconic Corporation (NYSE:ARNC)’s revenue of $2.28 billion climbed 20.6% on a year-over-year basis.
On November 2, Benchmark analyst Josh Sullivan reaffirmed a Buy recommendation on Arconic Corporation (NYSE:ARNC) but trimmed the firm's price target on the shares to $30 from $35, citing guidance, recent operational challenges, weakness in Europe, and inflationary constraints following the company's Q3 results. While he has lowered FY23 estimates, the analyst sees about $100 million worth of operational challenges resolved for Arconic Corporation (NYSE:ARNC) and thinks rebounding aerospace and pent up automotive demand can offset soft industrial and packaging markets.
According to Insider Monkey’s second quarter database, Arconic Corporation (NYSE:ARNC) was part of 19 hedge fund portfolios, compared to 25 in the prior quarter. William B. Gray’s Orbis Investment Management held the leading position in the company, comprising 6.5 million shares worth $184 million.
In addition to Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Tesla, Inc. (NASDAQ:TSLA), Arconic Corporation (NYSE:ARNC) is one of the top stocks to monitor in the current market environment.
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Disclosure: None. 10 Best Small-Cap Stocks To Buy Now is originally published on Insider Monkey.
