Small-cap stocks are a class of equities that can significantly impact a growth portfolio. There are a couple of reasons for this.
First, in bull markets, small-cap stocks tend to outperform the broader market because investors have a larger appetite for risk. Second, small-cap stocks are historically an indicator of investor sentiment turning from bearish to bullish (and vice versa). This rewards investors who stay invested in these stocks.
Of course, that risk works both ways. In a market correction and/or bear market, small-cap stocks can drop significantly more than mid- or large-cap stocks. That's the challenge for investors, but one that can be managed when you look for small-cap stocks that are leaning into market trends.
That's the focus of this special presentation. It focuses on seven small-cap stocks well-positioned for market trends likely to stick around through 2023.
Quick Links
- Boot Barn
- Hudbay Minerals
- Gossamer Bio
- Vivid Seats
- Maxar Technologies
- Hain Celestial Group
- ThredUp
#1 - Boot Barn (NYSE:BOOT)
If you’re of the belief that retail will snap back, then Boot Barn (NYSE:BOOT) may hold some appeal. The lifestyle retailer sells western and work-related footwear (i.e., boots), apparel, and accessories. The company has a network of stores as well as an e-commerce business.
BOOT stock was a favorite as a reopening play. The stock soared 185% in 2021. But that seems like ancient history to current investors. The stock is trading for $58.51 a share as of this writing. That’s down over 50% from where it closed in 2021 and more than twice the drop of the S&P 500 Index.
Nevertheless, Boot Barn makes this list because it is maintaining its forecast for double-digit revenue growth of approximately 13% in FY2023. And the company forecasts earnings per share (EPS) in a range of $6.00 to $6.20 as compared to the $6.18 it posted for the last fiscal year.
And with a price-to-earnings (P/E) ratio of just over 9x earnings, BOOT stock no longer looks like it’s overvalued. Analysts surveyed by MarketBeat assign the stock a Moderate Buy rating with a consensus price target of $112.90.
About Boot Barn
Boot Barn Holdings, Inc, a lifestyle retail chain, operates specialty retail stores in the United States. The company's specialty retail stores offer western and work-related footwear, apparel, and accessories for men, women, and kids. It offers boots, shirts, jackets, hats, belts and belt buckles, handbags, western-style jewelry, rugged footwear, outerwear, overalls, denim, and flame-resistant and high-visibility clothing.
Read More - Current Price
- $132.65
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $164.55 (24.0% Upside)
#2 - Hudbay Minerals (NYSE:HBM)
If you’re willing to invest in a penny stock, Hudbay Minerals (NYSE:HBM) may be of interest. The reason is the Canadian mining company produces copper concentrates containing one or more of the precious metals the company mines.
Copper is going to be one of the essential metals for many aspects of a clean energy economy. Most notably, copper demand is expected to accelerate for electric vehicles and solar panel production.
The good news for investors is that copper stocks are currently not priced with this in mind. In fact, HDM stock is down 45% for the year. But analysts give the stock a price target of $9.83, which would be a 150% gain from the stock’s current level.
There is some concern that copper prices may not recover as quickly as hoped, but investors shouldn’t be too concerned. Hudbay Minerals has a sound balance sheet that will allow the company to weather the current environment, which may threaten less-sound companies.
About Hudbay Minerals
Hudbay Minerals Inc, a diversified mining company, focuses on the exploration, development, operation, and optimization of properties in North and South America. It produces copper concentrates containing gold, silver, and molybdenum; gold concentrates containing zinc; zinc concentrates; molybdenum concentrates; and silver/gold doré.
Read More - Current Price
- $9.03
- Consensus Rating
- Buy
- Ratings Breakdown
- 6 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $11.17 (23.7% Upside)
#3 - Gossamer Bio (NASDAQ:GOSS)
The small-cap sector is filled with biotech companies, and with good reason. Many of these are clinical-stage companies that lack earnings and, in many cases, revenue. These companies are working on drugs and therapeutics that will potentially be used to treat a range of diseases and other conditions.
Such is the case for Gossamer Bio (NASDAQ:GOSS). The company does not have a commercially available drug. But its lead candidate, seralutinib, is in stage 2 trials. Seralutinib, given the clinical name GB002, targets Pulmonary Arterial Hypertension (PAH). This condition has a five-year survival rate of approximately 55% with the current standard of care available.
Results from the stage 2 trial are expected by the end of 2022. An analyst from Wedbush forecasts that if the drug could capture 42% of the market and deliver $2.5 billion in revenue to Gossamer Bio if it launches, as forecast, in 2026.
Wedbush isn’t the only bullish analyst. In fact, GOSS stock has a Moderate Buy rating with a consensus price target of $19.60, a 58% upside from its current price.
About Gossamer Bio
Gossamer Bio, Inc, a clinical-stage biopharmaceutical company, focuses on developing and commercializing seralutinib for the treatment of pulmonary arterial hypertension (PAH) in the United States. The company is developing GB002, an inhaled, small molecule, platelet-derived growth factor receptor, or PDGFR, colony-stimulatin factor 1 receptor and c-KIT inhibitor, which is in Phase 3 clinical trial for the treatment of PAH.
Read More - Current Price
- $0.70
- Consensus Rating
- Buy
- Ratings Breakdown
- 5 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $9.20 (1,220.9% Upside)
#4 - Vivid Seats (NASDAQ:SEAT)
In 2022, the most resilient part of the economy has been travel and entertainment. Pent-up demand is still driving this sector of the market. And this is why Vivid Seats (NASDAQ:SEAT) may merit a closer look.
Vivid Seats is part of what is known as the “secondary market” for tickets. This means if you’re looking to buy tickets for events such as a concert or sporting event, you can visit a site (or app) such as Vivid Seats and find tickets for events that may be sold out. Or to find better seats than those that are available from the venue itself. And while consumers may find themselves paying more, they sometimes can pay far less.
SEAT stock only began trading publicly in late 2020. That doesn’t give investors much of a track record to go on. But the company has posted two profitable quarters with consistent revenue. And analysts tracked by MarketBeat give SEAT stock a bullish $13.05 consensus price target which is 67.95% higher than its price as of October 17, 2022.
About Vivid Seats
Vivid Seats Inc operates an online ticket marketplace in the United States, Canada, and Japan. The company operates in two segments, Marketplace and Resale. The Marketplace segment acts as an intermediary between event ticket buyers and sellers; processes ticket sales on its website and mobile applications through its distribution partners; and sells tickets for sports, concerts, theater events, and other live events.
Read More - Current Price
- $3.63
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.67 (83.7% Upside)
#5 - Maxar Technologies (NYSE:MAXR)
The next stock makes this list for current and future reasons. Through its Earth Intelligence business unit, Maxar Technologies (NYSE:MAXR) provides 90% of the geospatial intelligence used by the U.S. government. This ranges from national security concerns to keeping our troops protected. The company recently received a contract renewal from the U.S. National Geospatial-Intelligence Agency (NGA). The renewal, which is the third of three years, is valued at $44 million.
The company also has a Space Infrastructure unit. As you would expect, this provides space-based infrastructure. The company has been providing its products and services since before the United States successfully put a man on the moon. And the current interest in space travel should serve as a catalyst for MAXR stock. According to Morgan Stanley (NYSE:MS), space tourism may become a $1 trillion industry by 2040.
Even with some analysts have recently lowered their price targets for MAXR stock, it still has a $40.27 consensus price target which would be a 99% upside from the current price.
About Maxar Technologies
Maxar Technologies Inc provides earth intelligence and space infrastructure solutions in the United States, Asia, South America, Europe, the Middle East, Australia, Canada, and internationally. It operates through two segments, Earth Intelligence and Space Infrastructure. The Earth Intelligence segment offers earth imagery and other geospatial data sourced from its advanced satellite constellation and third-party providers to public sector and enterprise customers, as well as a provides advanced geospatial information, applications, and analytic services for national security and commercial solutions.
Read More - Current Price
- $52.99
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - Hain Celestial Group (NASDAQ:HAIN)
If you’re not familiar with Hain Celestial Group (NASDAQ:HAIN), you may make you think this is another company that deals in space travel. But that’s not the case. The company was formed as a merger between Hain Foods and Celestial Seasonings.
The combined company makes organic and natural foods as well as botanically-based personal care products. This includes the Gluten-free product market, which Research and Markets reports will reach $10.96 billion by 2029 at a compound annual growth rate (CAGR) of 8.3%.
In 2021, HAIN stock soared along with the broader market. But 2022 has been a different story. The stock is down 60% on lagging revenue due to inflation and supply chain issues.
Nevertheless, this link to gluten-free products tilts the company into the consumer staples sector. Consumers who need the company’s products would be considered essential. And Consumer staples continue to do well in this bear market.
About The Hain Celestial Group
The Hain Celestial Group, Inc manufactures, markets, and sells organic and natural products in United States, United Kingdom, Europe, and internationally. It operates through two segments: North America and International. The company offers infant formula; infant, toddler, and kids' food; plant-based beverages and frozen desserts, such as soy, rice, oat, and spelt; and condiments.
Read More - Current Price
- $7.42
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $9.43 (27.1% Upside)
#7 - ThredUp (NASDAQ:TDUP)
The last of the small-cap stocks on this list is ThredUp (NASDAQ:TDUP). It’s also a penny stock, but it may not be for much longer. The company is essentially an online consignment store that allows consumers to buy and sell secondhand women’s and kids’ apparel, shoes, and accessories.
As you would expect, with inflation at 40-year highs, there’s significant demand for secondhand clothes in an effort to save money. In the first two quarters of 2022, revenue is up 28% to $149.12 million. The issue here is profitability. The company isn’t profitable now and is not expected to post a profit in the next few years.
In the short term, expect the strength of the company’s top line to continue, particularly as it promotes the environmental benefit of owning secondhand clothing. However, before taking a large position, it might be worth seeing if there’s interest in ThredUp as a takeover target. The recent acquisition of Poshmark (NASDAQ:POSH) is fueling speculation that the much smaller ThredUp could be purchased as well. That’s not a great reason to own the stock, but if you have some speculative dollars to put on a penny stock, this could pay off in the next couple of years.
About ThredUp
ThredUp Inc, together with its subsidiaries, operates an online resale platform in the United States and internationally. Its platform enables consumers to buy and sell primarily secondhand apparel, shoes, and accessories. ThredUp Inc was incorporated in 2009 and is headquartered in Oakland, California.
- Current Price
- $1.26
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $3.40 (169.8% Upside)
If you're familiar with small-cap stocks, then many of the names in this presentation may be familiar to you. If you're not, you may be pleased to see that you can find small-cap stocks in almost every market sector. And many of these companies have a solid history of revenue and earnings. They're just operating on a smaller scale.
If you like the idea of investing in small-cap stocks but don't find any of these stocks appealing, you can use the MarketBeat list of Top-Rated Small-Cap Stocks to generate ideas. You can also use the MarketBeat Stock Screener tool to refine your search even more.
And there's always the option to find an exchange-traded fund (ETF) or mutual fund that specifically tracks small-cap stocks. Two such options are the SPDR S&P 600 Small Cap ETF (NYSEARCA:SLY) and the Invesco S&P SmallCap Value with Momentum ETF (NYSEARCA:XSVM).
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