In this article, we discuss 10 best-performing small-cap stocks of 2022.
O’Shaughnessy Asset Management demonstrated the relative outperformance of smaller and cheaper stocks over the long-term. The firm conducted a study measuring the annualized excess return of small-cap stocks versus large-caps in a period starting from 1964 through 2017. The results showed that smaller stocks generated an annualized excess return of 5.1% over the 54-year study, while expensive large-cap stocks generated annualized losses of 11.0%. Historical data also suggests that following extreme economic downturns, small-cap value stocks outperformed large-cap growth plays by 16.8% annualized over the next 10 years.
Small-caps benefit the most when an economy is rebounding from a slowdown. When the economy is recovering, unemployment rates rapidly go down, and businesses experience robust earnings growth, making it an ideal time to invest in small-cap stocks. Some of the biggest companies today, such as Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Microsoft Corporation (NASDAQ:MSFT), once traded as small-caps too. The key to successful investing is buying cheap stocks with strong potential before the broader market realizes their value.
Our Methodology
We selected the companies with market capitalization ranging from $300 million to $2 billion that have gained more than 100% year to date. The hedge fund sentiment around the securities was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
We have ranked the list according to the YTD share price gains, from lowest to highest.
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Best-Performing Small-Cap Stocks of 2022
10. Aerie Pharmaceuticals, Inc. (NASDAQ:AERI)
Number of Hedge Fund Holders: 24
YTD Share Price Gain as of October 3: 101.54%
Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) was incorporated in 2005 and is headquartered in Durham, North Carolina. Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) is a pharmaceutical company engaged in the development and commercialization of ophthalmic therapies for open-angle glaucoma, dry eye, diabetic macular edema, and wet age-related macular degeneration in the United States. Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) stock gained 101.54% year-to-date as of October 3, making it one of the best-performing small-cap stocks of 2022.
On August 23, Alcon Inc. (NYSE:ALC) announced that it will acquire Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) in a deal valued at approximately $770 million. The purchase price of $15.25 per share represents a premium of 37% to Aerie Pharmaceuticals, Inc. (NASDAQ:AERI)’s last closing price. The deal is anticipated to close in the fourth quarter of 2022. This deal will solidify Alcon’s existing commercial portfolio in the $20 billion global ophthalmic pharmaceutical market.
Citi analyst Yigal Nochomovitz on August 29 downgraded Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) to Neutral from Buy with a price target of $15.25, up from $14, citing the pending acquisition by Alcon. It is “highly improbable that another bidder would emerge at this stage,” the analyst told investors in a research note.
According to Insider Monkey’s data, 24 hedge funds were bullish on Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) at the end of Q2 2022, up from 21 funds in the prior quarter. James E. Flynn’s Deerfield Management is a notable position holder in the company, with 4.70 million shares worth $35.2 million.
Like Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Microsoft Corporation (NASDAQ:MSFT), Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) is on the radar of elite investors.
9. Tidewater Inc. (NYSE:TDW)
Number of Hedge Fund Holders: 16
YTD Share Price Gain as of October 3: 102.93%
Tidewater Inc. (NYSE:TDW) is a Texas-based company that provides offshore marine support and transportation services to the offshore energy sector through the operation of marine service vessels worldwide. The earnings and revenue in Q2 2022 beat Wall Street estimates, and Average Active Vessels increased from 118 to 172 on a year-over-year basis. Tidewater Inc. (NYSE:TDW) stock gained about 103% year-to-date as of October 3, which is why it made it to our list of the best-performing small-cap stocks of 2022.
On September 6, Evercore ISI analyst James West resumed coverage of Tidewater Inc. (NYSE:TDW) with an Outperform rating and a $42 price target. Tidewater Inc. (NYSE:TDW)’s acquisition of Swire Pacific Offshore created the industry’s largest fleet of OSVs, said the analyst, who sees Tidewater as “one of the biggest beneficiaries” of the offshore oil and gas market being in the initial innings of what he anticipates to be “a long and strong upcycle.”
According to Insider Monkey’s data, 16 hedge funds were long Tidewater Inc. (NYSE:TDW) at the end of June 2022, with collective stakes worth $156.5 million, compared to 14 funds in the earlier quarter worth $148 million. Amit Wadhwaney’s Moerus Capital Management is the largest position holder in the company, with 2.4 million shares valued at $50.85 million.
Here is what Third Avenue Management Small-Cap Value Fund has to say about Tidewater Inc. (NYSE:TDW) in its Q1 2022 investor letter:
“Within the Fund, a rapid rise in oil prices benefitted the investment in oil services company Tidewater (NYSE:TDW), which more than doubled in price last quarter. The time-arbitrage/special-situations bucket is predominantly composed of energy services company Tidewater, and other out of favor, misunderstood companies such as Hamilton Beach Brands. All of these companies are cyclical and currently out of favor, but given their strong financial positions, Fund Management believes they have the luxury of time and capital to invest and grow until the clouds dissipate.”
8. TransMedics Group, Inc. (NASDAQ:TMDX)
Number of Hedge Fund Holders: 13
YTD Share Price Gain as of October 3: 105.50%
Next on our list of the best-performing small-cap stocks of 2022 is TransMedics Group, Inc. (NASDAQ:TMDX), a Massachusetts-based commercial-stage medical technology company which specializes in organ transplant therapy for end-stage organ failure patients in the United States and internationally. TransMedics reported another solid quarterly performance in June 2022, with upside in revenue versus Wall Street estimates. TransMedics Group, Inc. (NASDAQ:TMDX) stock climbed 105.5% year-to-date as of October 3.
On August 2, JPMorgan analyst Allen Gong upgraded TransMedics Group, Inc. (NASDAQ:TMDX) to Overweight from Neutral with a $48 price target. The company reported “another impressive beat-and-raise” in Q2 2022 as momentum across all three organs was sustained by the ongoing success of the National OCS Program, the analyst told investors in a research note. He cited TransMedics Group, Inc. (NASDAQ:TMDX)’s “highly attractive market opportunity, differentiated product offering, and above-peer growth profile” for the upgrade.
Among the hedge funds tracked by Insider Monkey, 13 funds reported owning stakes worth $60.8 million in TransMedics Group, Inc. (NASDAQ:TMDX) at the end of June 2022, up from 5 funds in the prior quarter worth $19.6 million. Richard Driehaus’ Driehaus Capital is the largest position holder in the company, with 614,881 shares worth $19.3 million.
7. CinCor Pharma, Inc. (NASDAQ:CINC)
Number of Hedge Fund Holders: 9
YTD Share Price Gain as of October 3: 112.31%
CinCor Pharma, Inc. (NASDAQ:CINC) was incorporated in 2018 and is based in Waltham, Massachusetts. It is a clinical-stage biopharmaceutical company that develops medicines for the treatment of cardio-renal diseases. On September 28, the company announced that data from the BrigHtn trial demonstrated that its drug, baxdrostat, can potentially be paired with other agents to control high blood pressure in patients whose hypertension is refractory to treatment. As of October 3, CinCor Pharma, Inc. (NASDAQ:CINC) stock has climbed over 112% on a year-to-date basis. It is one of the best-performing small-cap stocks of 2022.
On September 26, LifeSci Capital initiated coverage of CinCor Pharma, Inc. (NASDAQ:CINC) with an Outperform rating and a $64 price target.
According to Insider Monkey’s data, 9 hedge funds were long CinCor Pharma, Inc. (NASDAQ:CINC) at the end of the second quarter of 2022, with collective stakes worth $160 million, compared to 9 funds in the prior quarter worth $130 million. Joseph Edelman’s Perceptive Advisors is the leading stakeholder of the company, with 2.3 million shares worth $43.7 million.
6. NexTier Oilfield Solutions Inc. (NYSE:NEX)
Number of Hedge Fund Holders: 30
YTD Share Price Gain as of October 3: 113.70%
NexTier Oilfield Solutions Inc. (NYSE:NEX) is headquartered in Houston, Texas, providing well completion and production services in multiple active and demanding basins. On August 3, NexTier Oilfield Solutions Inc. (NYSE:NEX) purchased the sand hauling, wellsite storage, and last mile logistics businesses from Continental Intermodal Group for approximately $27 million in cash and 500,000 common shares. The firm now owns all rights and interests in Sandstorm Wellsite Storage Technology as a result of this deal.
On September 26, Morgan Stanley analyst Connor Lynagh downgraded NexTier Oilfield Solutions Inc. (NYSE:NEX) to Equal Weight from Overweight with an unchanged price target of $13. The analyst favors energy services and equipment firms instead of land drillers. The North American services industry has potential to “better delineate capital returns and reinvestment frameworks to prove to the market that another cyclical capacity overbuild is not underway,” the analyst told investors in a research note.
According to Insider Monkey’s Q2 data, 30 hedge funds were long NexTier Oilfield Solutions Inc. (NYSE:NEX), up from 28 funds in the earlier quarter. Stephen Feinberg’s Cerberus Capital Management is the largest stakeholder of the company, with 27.4 million shares worth $247.7 million.
Investors can solidify their portfolio by looking into NexTier Oilfield Solutions Inc. (NYSE:NEX), in addition to Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Aristotle Capital Management Small Cap Equity has to say about NexTier Oilfield Solutions Inc. (NYSE:NEX) in its Q1 2022 investor letter:
“NexTier Oilfield Solutions (NYSE:NEX), a provider of hydraulic fracturing and other completion-oriented oilfield services to exploration and production companies in the U.S., benefited from rising U.S. completion activity and rising prices due to tight supply/demand fundamentals for frac equipment. We maintain a position, as we believe the company’s dedicated service agreements, solid execution and merger synergies from recent mergers and acquisitions activity can unlock additional value for shareholders in periods to come.”
5. NextDecade Corporation (NASDAQ:NEXT)
Number of Hedge Fund Holders: 8
YTD Share Price Gain as of October 3: 118.17%
NextDecade Corporation (NASDAQ:NEXT) is a Texas-based company engaged in the liquefaction and sale of liquefied natural gas, as well as capture and storage of carbon dioxide emissions. On September 15, NextDecade Corporation (NASDAQ:NEXT) announced that it will sell $85 million of its common stock to 10 institutional investors. Each share was priced at $5.50 per share and the company will use the proceeds to continue development activity on the first three trains at its Rio Grande LNG project. The private placement was closed on September 19, 2022.
Stifel analyst Benjamin Nolan on July 28 upgraded NextDecade Corporation (NASDAQ:NEXT) to Hold from Sell with a price target of $6, up from $4.50, after the company announced a new 1 million ton contract with Exxon Mobil Corporation (NYSE:XOM), which marks the fifth new long-term sale and purchase agreement signed in 2022.
Among the hedge funds tracked by Insider Monkey, NextDecade Corporation (NASDAQ:NEXT) was part of 8 hedge fund portfolios at the end of Q2 2022, compared to 14 funds in the last quarter. James Dinan’s York Capital Management is the largest stakeholder of the company, with 57.3 million shares worth $254.5 million.
4. Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM)
Number of Hedge Fund Holders: 16
YTD Share Price Gain as of October 3: 121.37%
Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) was founded in 2008 and is headquartered in Boston, Massachusetts. It is a commercial-stage biopharmaceutical company focused on the development and commercialization of therapeutics for rare genetic diseases of obesity. Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) offered a public offering of 4.8 million units of its common stock priced at $26.00 per share. The offering closed on September 19, 2022. As of October 3, the stock has gained more than 121% year-to-date, which makes it one of the best-performing small-caps of 2022.
On August 7, Goldman Sachs analyst Corinne Jenkins upgraded Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) to Buy from Neutral with a $28 price target, citing a high probability of clinical success in its Hypothalamic Obesity trial.
According to Insider Monkey’s data, 16 hedge funds were long Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) at the end of the second quarter of 2022, compared to 14 funds in the last quarter. Peter Kolchinsky’s RA Capital Management is the largest stakeholder of the company, with 4.8 million shares worth $20.2 million.
3. International Seaways, Inc. (NYSE:INSW)
Number of Hedge Fund Holders: 19
YTD Share Price Gain as of October 3: 130.97%
International Seaways, Inc. (NYSE:INSW) is a New York-based company that owns and operates a fleet of vessels for the transportation of crude oil and petroleum products in the international flag trade. On September 12, International Seaways, Inc. (NYSE:INSW) declared a $0.12 per share quarterly dividend, in line with previous. The dividend was distributed to shareholders on September 28. International Seaways, Inc. (NYSE:INSW) is one of the best-performing small-cap stocks of 2022.
On July 27, BTIG analyst Gregory Lewis upgraded International Seaways, Inc. (NYSE:INSW) to Buy from Neutral with a $30 price target. The combination of consistent increases in global oil production, robust global oil demand, and moderating fleet growth over the next few years indicates increasing crude tanker rates in the medium term, the analyst told investors. The analyst believes the “worst is in the rearview mirror for crude tankers” and expects a “gradual melt up in rates into 2023.” He saw 30% upside in International Seaways, Inc. (NYSE:INSW) stock.
According to Insider Monkey’s Q2 data, 19 hedge funds were bullish on International Seaways, Inc. (NYSE:INSW), up from 17 funds in the preceding quarter. Stephen C. Freidheim’s Cyrus Capital Partners is the biggest stakeholder of the company, with 1.76 million shares worth $37.3 million.
Here is how ClearBridge Investments mentioned International Seaways, Inc. (NYSE:INSW) in the Q2 2022 investor letter:
“The Strategy also benefited from our holding in International Seaways, Inc. (NYSE:INSW), in the energy sector, which owns and operates a fleet of oceangoing vessels for the transportation of crude oil and petroleum products. The company benefited during the quarter as a result of tightness in the oil market, particularly in Europe, as low global inventories and high demand have spurred greater need for transportation between states that are net energy producers with those that are net energy consumers.
Additionally, economic sanctions placed on Russia and its companies have reduced the global number of oil and petroleum transportation ships, resulting in greater demand for International Seaways’s services and allowing it to increase its shipping rates, to the benefit of its bottom line. We continue to view the company as a strong value play, as decades of underinvestment in maritime shipping has resulted in many ships approaching a forced retirement date with no obvious replacements.
As the number of available ships declines, particularly specialized ships such as International Seaways’s energy transports, it should help to bolster the company’s pricing and negotiation power with its customers. We believe the company’s shares are currently trading at substantially below the current book value of the company’s assets, and as a result we continue to have high conviction in International Seaways as a long-term value creation opportunity.”
2. Belite Bio, Inc (NASDAQ:BLTE)
Number of Hedge Fund Holders: 1
YTD Share Price Gain as of October 3: 183.29%
Belite Bio, Inc (NASDAQ:BLTE) is a California-based clinical-stage biopharmaceutical drug development company, specializing in the research and development of novel therapeutics for atrophic age-related macular degeneration and autosomal recessive stargardt diseases. The stock has climbed over 183% year-to-date as of October 3, making it one of the best-performing small-cap names of 2022.
H.C. Wainwright analyst Yi Chen on August 1 initiated coverage of Belite Bio, Inc (NASDAQ:BLTE) with a Buy rating and a $58 price target, noting that the company has a unique approach for a rare juvenile-onset retinal disorder.
1. Target Hospitality Corp. (NASDAQ:TH)
Number of Hedge Fund Holders: 14
YTD Share Price Gain as of October 3: 248.54%
Target Hospitality Corp. (NASDAQ:TH) stock has gained 248.5% year-to-date as of October 3, which merits its inclusion on our list of the best-performing small-cap stocks of 2022. Target Hospitality Corp. (NASDAQ:TH) is a Texas-based specialty rental and hospitality services company. The company serves the U.S. government, government contractors, investment grade natural resource development companies, and energy infrastructure companies.
On July 12, Oppenheimer analyst Scott Schneeberger raised the price target on Target Hospitality Corp. (NASDAQ:TH) to $18 from $9 and maintained an Outperform rating on the shares after updating the model for Target Hospitality Corp. (NASDAQ:TH)’s recently announced contract extension of its West Texas government facility.
According to the second quarter database of Insider Monkey, 14 hedge funds held stakes worth $47.8 million in Target Hospitality Corp. (NASDAQ:TH), compared to 13 funds in the prior quarter worth $46.7 million. Gregg J. Powers’ Private Capital Management is the leading stakeholder of the company, with 5.8 million shares valued at $33.5 million.
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Disclosure: None. 10 Best-Performing Small-Cap Stocks of 2022 is originally published on Insider Monkey.
