There’s nothing like a steep market correction to test the risk appetite of even the most seasoned investor. With many investors seeing their 401k’s down 25%, 30% or more, it’s not surprising that many investors are taking money off the table.
And even during the most bullish market conditions, keeping some powder dry is a prudent decision.
But if you have an above-average risk appetite, then sitting on the sidelines is not your cup of tea. If you’re an investor with above-average risk tolerance, there are some opportunities to profit in this market. But you have to be looking in the right places.
At this time, the small-cap sector offers some interesting choices. Small-cap stocks are companies that have a market cap of less than $2 billion. Many of these stocks fall under the category of penny stocks, but that doesn’t make them bad. In some cases, they’re just obscure companies.
But right now, many investors will take growth wherever they can get it. And that’s why you should take a careful look at the 7 stocks we have in this presentation. The cost of entry is not high and the potential reward is worth your interest.
Quick Links
- Endphase Energy
- Drdgold
- Envela
- Orion Energy Systems
- NantHealth
- PolyOne
- GW Pharmaceuticals
#1 - Endphase Energy (NASDAQ:ENPH)
Enphase Energy (ENPH) Year-to-date gain = 60%
The business model for Enphase Energy (NASDAQ:ENPH) is deceptively simple, but extremely necessary. The renewable energy company provides inverters that convert direct current (DC) to alternating current (AC). For the uninitiated, when power is generated using wind or solar it is converted to direct current. However, the U.S. electrical grid (as well as all homes and businesses) use alternating current.
Enphase inverters convert the direct current to alternating current so it can be used. As simple as it may sound, ENPH doesn’t have a lot of competitors in the field. This gives it a significant moat in both national and international markets. ENPH stock is up over 60% for the year. But analysts believe the stock has more room to grow. The consensus price target is over $52 a share, which gives the stock a gain of over 12% from current levels.
Recent analyst reviews suggest the stock may be in danger of falling demand in the energy sector. However, as the economy re-opens, it’s likely that demand will increase. The company reports earnings on May 5, so investors should pay close attention to the company’s guidance.
Enphase Energy is a recent addition to the select S&P Mid Cap 400 Index. The company has a market cap of over $6 billion.
About Enphase Energy
Enphase Energy, Inc, together with its subsidiaries, designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. The company offers semiconductor-based microinverter, which converts energy at the individual solar module level and combines with its proprietary networking and software technologies to provide energy monitoring and control.
Read More - Current Price
- $71.45
- Consensus Rating
- Hold
- Ratings Breakdown
- 14 Buy Ratings, 15 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $100.33 (40.4% Upside)
#2 - Drdgold (NYSE:DRD)
Drdgold (DRD) Year-to-date gain = 73%
During times of monetary easing, many investors make a flight to gold. Sure enough, ever since last summer when the Federal Reserve began lowering interest rates, the price of gold has been rising. And with the recent Fed interventions spawned by the Covid-19 pandemic, gold is rising to highs not seen since 2011. But there are many ways to invest in gold other than taking possession of the physical bullion.
Some investors will invest in mining stocks. But Drdgold (NYSE:DRD) may be a better, but less well-known option. Drdgold is a reclamation company, not a traditional miner. The company acquires or leases old gold mines and performs surface gold mining. The company does everything related to the mining and extraction of gold and more.
Because of this, it can dial-up or scale back operations to move with the price of gold. And when gold prices are rising, as they are now, so does the company’s margins and profits.
Drdgold has a market cap of $800 million and despite being up nearly 40% in 2020, it still pays investors a regular dividend. The current dividend yield is around 2.5%, and the company has increased its dividend in each of the last 7 years.
About DRDGOLD
DRDGOLD Limited, a gold mining company, engages in the surface gold tailings retreatment business in South Africa. It also involved in the exploration, extraction, processing, and smelting activities. The company recovers gold from surface tailings in the Witwatersrand basin in Gauteng province. DRDGOLD Limited was formerly known as Durban Roodepoort Deep Limited and changed its name to DRDGOLD Limited in 2004.
Read More - Current Price
- $8.79
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $13.25 (50.7% Upside)
#3 - Envela (NYSEAMERICAN:ELA)
Envela (ELA) Year-to-date gain: 170%
Another stock that is a good play on gold stocks is Envela (NYSEAMERICAN:ELA). The company buys items such as jewelry, watches, diamonds and precious metals. It’s a pretty simple premise, as gold rises in value, customers look to sell their gold holdings. And if you take a look at the ELA stock chart, you can see that when gold prices spiked in the early 2000s and again around 2010, ELA stock reached its record high both times. Of course past history is not a guarantee of future performance, but there’s no reason to believe that the country will be tightening monetary policy anytime soon. And that bodes well for investors in ELA stock.
With many of these small-cap companies, market cap can be very fluid because they can increase quickly as the share price increases. That’s the case with Envela that has seen its stock has grown 170% this year and its market cap has also grown to $99 million.
About Envela
Envela Corporation, together with its subsidiaries, operates in the re-commerce sector in the United States. The company operates through two segments, Commercial-Services and Direct-To-Consumer. It provides end-of-life asset recycling; data destruction and IT asset management; and products, services, and solutions to industrial and commercial companies, as well as operates as a re-commerce retailers of luxury hard assets.
Read More - Current Price
- $7.43
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $7.00 (5.8% Downside)
#4 - Orion Energy Systems (NASDAQ:OESX)
Orion Energy Systems (OESX) Year-to-date gain = 43%
There’s a big story that is moving the energy sector that has nothing to do with the price of oil. Orion Energy Systems (NASDAQ:OESX) provides energy-efficient lighting solutions for commercial applications. This extends into the emerging trend towards wireless control systems using smart technology.
Before many office spaces and warehouses got shut down due to sheltering in place orders, business owners were looking for ways to reduce energy costs. And one way to do that is by paying attention to the lighting you use. And as businesses slowly begin to re-open, I expect this trend to continue.
In the meantime, however, the show must go on. And that means that there are warehouses and distribution centers are being built to service the e-commerce needs of our nation. And that is another catalyst for OESX stock which is up 43% for the year yet still has an attractive price-earnings ratio of just fewer than 12.
Orion has posted three consecutive quarters of profitable earnings. Since the beginning of the year, Orion has been reviewed by four analysts and has a consensus 12-month price target of $7. That would be a nearly 50% gain from the stock’s current level.
About Orion Energy Systems
Orion Energy Systems, Inc, together with its subsidiaries, researches, designs, develops, manufactures, markets, sells, installs, and implements energy management systems for commercial office and retail, area lighting, industrial applications, and government in North America and Germany. It operates in three segments: Lighting, Maintenance, and Electric Vehicle (EV).
Read More - Current Price
- $0.84
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $3.00 (257.1% Upside)
#5 - NantHealth (NASDAQ:NH)
NantHealth (NH) Year-to-Date gain: 180%
NantHealth (NASDAQ:NH) is an example of a company that was probably a little ahead of its time. The company has been on the vanguard of delivering personalized healthcare treatments. It uses technology to bring together patients, doctors, and insurers to develop optimized outcomes.
But a technologically forward company like NR is not resting on its laurels. NR announced earlier this year, that it was launching AI-based software that will be used to better diagnose lung cancer. But more importantly, it is selling its connected care business (which is getting crowded) so that it can focus on this new software diagnostic tool.
Many investors may think that all health care stocks are good investments at this point. That’s simply not the case. But for the long term, NantHealth appears to be occupying a space that will be growing as AI makes its way into the health care system.
The company has a market cap of just over $318 million and the stock has gained a whopping 180% in 2020. If you’re interest in investing in NH be advised that the company has not posted positive earnings since going public in 2016. The company has not been analyzed in 2020 but is currently well above its consensus price target of $1.
About NantHealth
NantHealth, Inc engages in the provision of enterprise solutions that help businesses transform complex data into actionable insights. It is also involved in marketing solutions as a comprehensive integrated solution that includes clinical decision support, payer engagement solutions, data analysis, and network monitoring and management.
Read More - Current Price
- $0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - PolyOne (NYSE:POL)
PolyOne (POLY)
Year-to-date loss: - 30.6%
PolyOne (NYSE:POL) is a global provider of specialized polymer materials and services. The company is on the forefront of developing sustainable plastics solutions. It had 2018 revenue of $2.9 billion. PolyOne is posting a loss in 2020. However, analysts remain bullish on the stock. And despite POLY stock falling to a low of just over $10 in mid-March, the stock has rallied. In the last six weeks, it’s up over 130%.
The company recently posted higher earnings per share than analysts had expected. For growth investors, revenue is not as important as earnings. And PolyOne has among the fastest earnings growth.
And investors can not only benefit from solid earnings growth, but PolyOne also pays out a stable dividend. The company has a dividend yield of 3.44%. The dividend has increased its dividend in each of the last 8 years. The average increase has been 11.78% every year. And PolyOne’s payout ratio is 47.93% which means its dividend looks very sustainable.
About PolyOne
Avient Corp. engages in the business of thermoplastic compounds. It specializes in polymer materials, services, and solutions with operations in specialty polymer formulations, color and additive systems, plastic sheet and packaging solutions and polymer distribution. The firm is also involved in the development and manufacturing of performance enhancing additives, liquid colorants, fluoropolymers and silicone colorants.
Read More - Current Price
- $0.61
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - GW Pharmaceuticals (NASDAQ:GWPH)
GW Pharmaceuticals (GWPH) Year-to-date gain: Flat
Biopharmaceutical stocks can be among the most volatile stocks because it’s all about the pipeline. Such is the risk-reward proposition for GW Pharmaceuticals (NASDAQ:GWPH). The company is a pioneer in developing drugs from marijuana.
No matter where you stand on the medical marijuana debate, there’s no doubt that there is growing interest in the therapeutic effects of marijuana. This is only growing in the shadow of the opioid crisis that is still enveloping our country.
GW Pharmaceuticals has a product, Epidiolex, which has become a legitimate lead product candidate that is specifically targeted to treat Dravet Syndrome and Lennox-Gastaut Syndrome. Another drug, Sativex, is used to treat multiple sclerosis spasticity, is already available in the market.
GWPH stock is trading flat for the year, but has increased nearly 25% since mid-March. The stock has been reviewed by 14 analysts in the past few months and it has a 12-month price target of over $190. This suggests that the stock may have up to a 90% upside from its current price.
But keep in mind, another reason why investors should consider some of the more volatile stocks is that they are frequently good takeover targets. And if GW Pharmaceuticals can get these products to market, the company will likely become a tempting takeover target. And that could send the stock even higher than analysts predict.
About GW Pharmaceuticals
GW Pharmaceuticals plc, a biopharmaceutical company, focuses on discovering, developing, and commercializing novel therapeutics from its proprietary cannabinoid product platform in various disease areas. Its lead product is Epidiolex, an oral medicine for the treatment of seizures associated with Lennox-Gastaut syndrome, Dravet syndrome, or tuberous sclerosis complex.
Read More - Current Price
- $218.96
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
In this market, a traditional buy-and-hold investing strategy is being put to the test. As the record bull market of the last decade has come to a screeching halt, some of the top blue-chip stocks are finding it hard to deliver capital growth.
The good news is that more risk-tolerant investors have options for finding growth. Small-cap stocks can be a good area to find hidden gems. Many of these stocks are not household names, and many operate as niche players within their sectors.
An aggressive investment strategy is marked by high turnover. You’re not buying these stocks for the long haul, but you don’t want to settle for business as usual. And with these stocks, you don’t have to.
Keep in mind; these are fast-growing stocks. Most of these stocks don’t offer dividends. However, if you are limiting your exposure to these aggressive stocks, you can more than make up for the dividend with capital appreciation.
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