It seems the biggest concern the markets have at this point is that everyone agrees that we’re at the beginning of a big post-pandemic economic expansion. And if that’s the case, then one of the best ways to get involved in a growing market is with small-cap stocks.
They’re the best performing tier of stocks when economic growth is rising, since they have more ability to grow and grow quickly.
As you’re well aware, the markets love to see big growth numbers. And since small stocks are starting at a smaller base, their growth can seem much greater than bigger established companies.
Plus, all that new capital means the businesses can put more money into expanding their territory and staying competitive. This kind of market also brings in potential suitors before the stocks get too expensive.
The eight small-cap stocks to buy now I’ve assembled are great picks on their own or may be taken out at a big premium. Oh, and each has an overall Portfolio Grader rating of ‘A.’
- Aviat Networks (NASDAQ:AVNW)
- Big 5 Sporting Goods (NASDAQ:BGFV)
- Cowen (NASDAQ:COWN)
- Harbor One Bancorp (NYSE:HONE)
- Lovesac (NASDAQ:LOVE)
- Riley (NASDAQ:RILY)
- Schnitzer Steel (NASDAQ:SCHN)
- Container Store Group (NYSE:TCS)
Small-Cap Stocks to Buy: Aviat Networks (AVNW)
If you design and make wireless telecom equipment, you’re in a pretty good spot right now. 5G technology is replacing the 4G equipment and 5G is a completely different standard, with new antennas and distribution networks.
What’s more, with a massive infrastructure spending bill making its way through Congress, 5G firms are certain to be beneficiaries.
That’s good news for AVNW, since that’s precisely the business this small-cap stock is in. And with a market cap of $333 million it has plenty of room to grow or get bought out by a bigger integrated player.
Even after a 70% run year to date, AVNW stock is only trading at a current price-to-earnings ratio of 23x.
Big 5 Sporting Goods (BGFV)
As the pandemic slows in the U.S., sporting activities are expanding from socially distant sports to socially engaged sports. And with soccer, basketball, baseball and other sports back on the table for kids and adults, sporting goods stores should expect a big run.
BGFV has been in the sporting goods business since 1955. It now has around 430 stores in the West and Southwest markets. That stock has done very well in the past year but it’s still a bargain.
Currently, it’s up 64% year to date, yet it has a current P/E below 7x and it delivers a 3.5% dividend. Now that’s a winning combination.
Small-Cap Stocks to Buy: Cowen (COWN)
It may not have the cachet that Robinhood garners today, but Cowen is a financial services company that has been around since the last pandemic hit in 1918.
Starting as a bond trading house, over the years it expanded and has endured the Great Depression, and everything else that has happened in the past 100-plus years. That means it knows its business and manages it prudently, which is a nice idea in a wild market like this one.
Plus, with $11 billion in assets under management, it has chosen to remain a boutique firm (and a small-cap stock) and stay true to its principles rather than grow wildly and take on more risk to do it. Yet COWN stock is up 50% year to date, distributes a 0.8% dividend and has a current P/E below 6x.
Harbor One Bancorp (HONE)
Also doing business for more than a century, HONE is a Massachusetts-based bank that has operations in neighboring Rhode Island, New Jersey, New Hampshire and Maine as well.
It has about $4 billion in assets under management and the stock continues to perform well. As a long-time lender for commercial businesses as well as its strong presence in the mortgage lending market, HONE is performing well in the current environment. Remember, Cape Cod is a very hot spot for summer travel and this year it’s likely to be back to business as usual.
With a market cap of $824 million, it’s a decent sized small-cap stock, but it has got plenty of headroom. In fact, HONE stock is up 10% year to date, with a current P/E of 17x. And it has a money market-beating dividend of 1.4%.
Small-Cap Stocks to Buy: Lovesac (LOVE)
In case you haven’t been out in the furniture market in a while, it has changed a lot. A new generation of shoppers are looking at furniture differently than older demographics have.
First and foremost is utility. No more special rooms where the furniture is only for guests. Or “nice” pieces perennially covered in plastic or some other protective gear. Furniture is for living. And LOVE embodies that zeitgeist.
LOVE specializes in modular sectional furniture that can be more than a sofa. And it’s modular so you can keep it small in an apartment and then add pieces if you move to a house. It’s flexible and adjusts to your lifestyle, perfect for young families and Gen X couples and singles.
It has been around since the 1990s, but really took off a few years ago, as retail stores began to open around the U.S. The coronavirus pandemic slowed that aspect of its business, but low interest rates mean home improvements will bring back lots of customers.
LOVE is up 70% year to date and it’s in a growth phase. That means expansion, same store sales and revenue are the key numbers to watch moving forward. That (along with everything else mentioned above) also means it’s one of the small-cap stocks you should have on your radar.
B Riley (RILY)
With just 11 years under its belt, this financial services and solutions company for public and private companies has made a name for itself on a number of different levels.
It currently has a $1.8 billion market cap, which puts it on the upper tier of small-cap stocks, but much of that has been built during the past year as its services have been recognized as ideal complements to current market conditions.
RILY has traditional corporate financial services and it also offers bankruptcy workouts, as well as an auction business. These services are very beneficial in a market that’s either starting to expand or contract.
RILY stock is up 60% year to date, has a 2.5% dividend and a current P/E around 9x.
Small-Cap Stocks to Buy: Schnitzer Steel (SCHN)
Launched in Portland, Oregon in 1906, SCHN is a steel and metal recycler that operates for both the domestic U.S. market. Given its Pacific location, it also provides scrap and recycled metals to overseas markets as well.
In an expanding economy, steel prices rise along with other industrial metals, so recycled steel can be a way to save money on production costs, depending upon what companies are manufacturing. That makes now a growth market for SCHN.
With a market cap around $1.2 billion, SCHN has built a solid niche and is happy to make money doing what it does. SCHN stock is up 30% year to date, with a P/E of 21x and shares a 1.7% dividend.
Container Store Group (TCS)
Best known for its “The Container Store” brand, TCS also markets Swedish Elfa brand shelving solutions to a number of different home goods and home improvement stores around North America.
TCS was certainly a winner during the pandemic as lockdowns and social distancing meant people had the time and means to upgrade their homes, including decluttering, reorganizing and upgrading.
And now that the economy is opening up, there’s even more opportunity for TCS as home sales peak season gets underway and people will begin entertaining again. TCS stock is up 54% year to date yet has a current P/E under 21x. And with a market cap of $759 million, it’s in the sweet spot for small-cap stocks.
On the date of publication, Louis Navellier has positions in AVNW, BGFV, COWN, SCHN and TCS in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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