In this article, we discuss the 10 cheap small-cap stocks to buy.
As the global stock market is on its way to a remarkable recovery from its lows in March 2020, investors look for potential and lucrative investment opportunities. Investing in cheap small-cap stocks often provides a gainful opportunity to insightful investors, who spot great stocks long before they start generating profitable returns. This can be seen from the fact that in the past 20 years, the average difference in returns between small caps and the broader market has been 2.4%, the UBS Group reported.
According to analysts, during times of financial volatility, investors should look for small-cap stocks because of their growth potential and their tendency to outperform the large-caps during economic recovery phases. Business Insider reported that in 2020, small-cap stocks surpassed large caps. Russell 2000, which focuses on small-cap stocks, rallied 44.7% in the past year, outperforming Russell 1000’s gains of 32.9% during the same period. Russell 1000 represents the large-cap market segment, listing companies such as Alphabet Inc. (NASDAQ: GOOG), Apple Inc. (NASDAQ: APPL), Microsoft Corporation (NASDAQ: MSFT), and Amazon.com, Inc. (NASDAQ: AMZN). Moreover, this June marked the ninth consecutive profitable month of Russell 2000, according to a report by Wall Street Journal.
Small-cap stocks also remain investors’ choice because of their fair valuations which diversify investors’ portfolios. A cautious investment made in a cheap stock can offer greater growth potential when compared with established stocks. For example, in 2020 the total market capitalization of Russell 2000 grew 84.2% to $3.5 trillion. Investing in cheap small-cap stocks certainly raises red flags due to the possibility of scams but are also compensated by profitable long-term returns and more attractive entry points.
Some of the famous cheap small-cap stocks in our list include Comstock Resources, Inc. (NYSE: CRK), Ferroglobe PLC (NASDAQ: GSM), Express, Inc. (NYSE: EXPR), VEON Ltd. (NASDAQ: VEON), Prospect Capital Corporation (NASDAQ: PSEC), and Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS).
Our Methodology:
Let’s analyze the list of 10 best cheap small-cap stocks to buy. The stocks mentioned below are the small-cap companies, with market cap typically between $300 million to $3 billion. In addition to this, we took into account hedge fund sentiments, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
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Why pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
10. High Tide Inc. (NASDAQ: HITI)
Number of Hedge Fund Holders: 2
Market Cap: $386.6 million
Share Price as of September 13: $7.53
High Tide Inc. (NASDAQ: HITI) stands tenth on our list of the best cheap small-cap stocks to buy now. It is a retail-focused cannabis company that also distributes and manufactures consumption accessories. The company is the most profitable retailer of recreational cannabis.
Recently, High Tide Inc. (NASDAQ: HITI) signed a partnership with two Canada-based cannabis provider companies, Heritage Cannabis and Loosh Brands. The collaboration will manufacture the company’s ‘Cabana Cannabis’ branded gummies and will also expand its other categories in the coming years. In Q2 2021, High Tide Inc. (NASDAQ: HITI) reported revenue of C$40.8 million, presenting a 98.7% year-over-year growth.
By the end of September, the company expects to increase its stores from 18 to 30 in Ontario, Canada. In September, Roth Capital initiated its coverage on High Tide Inc. (NASDAQ: HITI), with a ‘Buy’ rating and a $12 price target. The firm’s analyst, Scott Fortune appreciated the company’s strategy of expanding retail stores. High Tide Inc. (NASDAQ: HITI) has delivered 143.3% returns in 2021 and 232.9% in the past year.
As of Q2 2021, 2 hedge funds tracked by Insider Monkey have positions in High Tide Inc. (NASDAQ: HITI), worth $198,000. No hedge funds tracked by Insider Monkey had stakes in the company in the previous quarter.
9. OrganiGram Holdings Inc. (NASDAQ: OGI)
Number of Hedge Fund Holders: 6
Market Cap: $726 million
Share Price as of September 13: $2.42
OrganiGram Holdings Inc. (NASDAQ: OGI) is a licensed medical cannabis provider. The company focuses on producing high-quality, indoor-grown cannabis for patients and consumers in Canada. OrganiGram Holdings Inc. (NASDAQ: OGI) ranks ninth on our list of the best cheap small-cap stocks to buy.
In fiscal Q3 2021, OrganiGram Holdings Inc. (NASDAQ: OGI) posted revenue of $20.3 million, up 13% from the prior-year quarter. The company attributed the growth in revenue to the increased adult use of medical marijuana, which accounted for $16.8 million of the gross revenue. Recently, OrganiGram Holdings Inc. (NASDAQ: OGI) announced the launch of cannabis-infused gummies, which will be sold as an extension of the company’s SHRED product portfolio. In August, Raymond James lifted its price target on OrganiGram Holdings Inc. (NASDAQ: OGI) to C$5, while keeping an ‘Outperform’ rating on the shares. Since the beginning of the year, OrganiGram Holdings Inc. (NASDAQ: OGI) delivered a 66.4% return to shareholders, while its 12-month returns came in at 127.09%.
With shares worth $1.8 million, Millennium Management is the company’s leading shareholder. As of Q2 2021, 6 hedge funds tracked by Insider Monkey have positions in OrganiGram Holdings Inc. (NASDAQ: OGI), worth $5.9 million. This number of hedge funds is compared with 9 funds in the previous quarter, with a total value of $15.2 million.
In addition to Alphabet Inc. (NASDAQ: GOOG), Comstock Resources, Inc. (NYSE: CRK), Apple Inc. (NASDAQ: APPL), Express, Inc. (NYSE: EXPR), Microsoft Corporation (NASDAQ: MSFT), and Amazon.com, Inc. (NASDAQ: AMZN), investors and analysts are also paying attention to OrganiGram Holdings Inc. (NASDAQ: OGI) amid the company’s long-term growth potential.
8. Electrameccanica Vehicles Corp. (NASDAQ: SOLO)
Number of Hedge Fund Holders: 7
Market Cap: $373 million
Share Price as of September 13: $3.30
Electrameccanica Vehicles Corp. (NASDAQ: SOLO) stands eighth on our list of the best cheap small-cap stocks to buy. It is a Canadian manufacturer and designer of electric vehicles. The company’s signature product is an innovative, purpose-built, and single-seat vehicle called the SOLO.
In Q2 2021, Electrameccanica Vehicles Corp. (NASDAQ: SOLO) expanded its SOLO retail footprint into ten additional high-end shopping centers in two states. With this recent development, the company’s operations have now reached 5 states and ten metropolitan areas in Canada. In the second quarter, Electrameccanica Vehicles Corp. (NASDAQ: SOLO) reported revenue of $0.3 million, beating the consensus by $0.21 million. The company ended the quarter with cash and cash equivalents of $250 million, compared with $129.5 million as of December 2020. In July, Colliers Securities lifted its price target on Electrameccanica Vehicles Corp. (NASDAQ: SOLO) to $7, while reiterating a ‘Buy’ rating on the shares. The stock gained 29.1% in the past year.
As of Q2 2021, 7 hedge funds tracked by Insider Monkey have positions in Electrameccanica Vehicles Corp. (NASDAQ: SOLO), worth $6.3 million. In the previous quarter, the number of hedge funds remained the same, with a total value of $11.8 million.
Like Alphabet Inc. (NASDAQ: GOOG), Comstock Resources, Inc. (NYSE: CRK), Apple Inc. (NASDAQ: APPL), Express, Inc. (NYSE: EXPR), Microsoft Corporation (NASDAQ: MSFT), and Amazon.com, Inc. (NASDAQ: AMZN), Electrameccanica Vehicles Corp. (NASDAQ: SOLO) is one of the most popular stocks among investors in 2021.
7. Ocugen, Inc. (NASDAQ: OCGN)
Number of Hedge Fund Holders: 10
Market Cap: $1.55 billion
Share Price as of September 13: $7.80
Ocugen, Inc. (NASDAQ: OCGN) is a clinical-stage biopharmaceutical company for developing and discovering gene therapies to cure multiple retinal diseases. Along with this, the company also develops vaccines to fight Covid-19. Ocugen, Inc. (NASDAQ: OCGN) ranks seventh on our list of the best cheap small-cap stocks to buy.
In July, Noble Capital’s analyst Robert Leboyer mentioned that Ocugen, Inc. (NASDAQ: OCGN) could benefit from Covaxin, its whole-virion vaccine for Covid-19, which has shown efficacy when injected with an adjuvant. The firm initiated its coverage on Ocugen, Inc. (NASDAQ: OCGN) in July, with an ‘Outperform’ rating and a $15 price target.
In Q2 2021, the company’s Research and Development expenses reached $18.9 million, compared with $1.6 million during the same period last year. At the end of the quarter, Ocugen, Inc. (NASDAQ: OCGN) had cash and cash equivalent totaled at $115.8 million, compared to $24.2 million in December 2020. Ocugen, Inc. (NASDAQ: OCGN) jumped from $0.30 per share in July 2020 to $7.80 per share in July 2021, gaining 2,219% in the past year.
As of Q2 2021, 10 hedge funds tracked by Insider Monkey have positions in Ocugen, Inc. (NASDAQ: OCGN), up from 6 in the previous quarter. The total value of these stakes is $48.8 million.
In addition to Alphabet Inc. (NASDAQ: GOOG), Comstock Resources, Inc. (NYSE: CRK), Apple Inc. (NASDAQ: APPL), Express, Inc. (NYSE: EXPR), Microsoft Corporation (NASDAQ: MSFT), and Amazon.com, Inc. (NASDAQ: AMZN), investors and analysts are also paying attention to Ocugen, Inc. (NASDAQ: OCGN) amid the company’s long-term growth potential.
6. Prospect Capital Corporation (NASDAQ: PSEC)
Number of Hedge Fund Holders: 11
Market Cap: $3.00 billion
Share Price as of September 13: $7.72
Prospect Capital Corporation (NASDAQ: PSEC) stands sixth on our list of the best cheap small-cap stocks to buy. It is a leading Business Development Company (BDC) that makes debt and equity investments in middle-market businesses in the U.S. The company makes investments in a wide range of industries to generate profitable returns for shareholders.
Prospect Capital Corporation (NASDAQ: PSEC) posted its fiscal Q4 results on August 24 and reported net investment income (NII) of $0.19, exceeding the estimates of $0.17. The company’s total investment income also showcased 8.4% year-over-year growth at $157.3 million. At the end of the quarter, Prospect Capital Corporation (NASDAQ: PSEC) has completed $350.9 million in total originations and 97.2% in middle-market lending. Since the beginning of the year, Prospect Capital Corporation (NASDAQ: PSEC) delivered a 39.7% return to shareholders, while its 12-month returns stood at $53.3%.
Arrowstreet Capital is the company’s largest shareholder with 3.6 million shares in the company, worth $30.6 million. As of Q2 2021, 11 hedge funds tracked by Insider Monkey have positions in Prospect Capital Corporation (NASDAQ: PSEC), up from 7 in the previous quarter. The total value of these stakes is $48.1 million.
5. VEON Ltd. (NASDAQ: VEON)
Number of Hedge Fund Holders: 13
Market Cap: $3.86 billion
Share Price as of September 13: $2.21
VEON Ltd. (NASDAQ: VEON) is a Dutch telecommunication and digital services company that offers services in telecommunication, voice, broadband, and wireless internet. The company ranks fifth on our list of the best cheap small-cap stocks to buy.
Recently, VEON Ltd. (NASDAQ: VEON) has signed an agreement to promote its Russian mobile network towers to Service Telecom, a Russian independent tower company. The deal is valued at $970 million and would provide an opportunity for the company to expand its operations in Russia, where it is already operating over 15,000 communication towers. In Q2 2021, VEON Ltd. (NASDAQ: VEON) reported revenue of $2.06 billion, beating the estimates by $46.1 million.
In August, BofA double-upgraded VEON Ltd. (NASDAQ: VEON) to ‘Buy’ with a $2.70 price target due to the company’s strong balance sheet. The firm’s analyst Cesar Tiron noted the company’s potential in its tower monetization and estimated that its free cash flow could rise to $624 million in 2023. VEON Ltd. (NASDAQ: VEON) gained 80.08% in the past year and 41.08% year to date.
The number of hedge funds having stakes in VEON Ltd. (NASDAQ: VEON) grew from 8 in the previous quarter to 13 in Q2 2021. The total value of these stakes is $51.4 million, compared with $20.2 million in the previous quarter. With 15.7 million shares, worth $28.8 million, Shah Capital Management is the company’s leading shareholder.
4. Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS)
Number of Hedge Fund Holders: 14
Market Cap: $372.9 million
Share Price as of September 13: $5.59
Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS) stands fourth on our list of the best cheap small-cap stocks to buy. It is a clinical-stage biotechnology company that develops medicines by combining protein engineering capabilities and a deep understanding of the molecular drivers of a particular disease.
In June, Jefferies lifted its price target on Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS) to $8, with a ‘Buy’ rating on the shares. The firm’s analyst Roger Song noted the company’s potential in the development of PRS-220 for post-Covid-19 syndrome pulmonary fibrosis, for which Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS) acquired a $17 million grant. In Q2 2021, Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS) posted a GAAP EPS of -$0.25, beating the consensus by $0.02. The company also beat revenue estimates by $1.21 million at $3.29 million. After hitting a low of $1.98 per share in March 2020 due to the global economic clampdown, the stock is now traded at $5.57 per share. Pieris Pharmaceuticals, Inc. (NASDAQ: PIRS) soared 90.6% in the past year and 103.9% year to date.
As of Q2 2021, 14 hedge funds tracked by Insider Monkey have positions in Pieris Pharmaceuticals, Inc. (PIRS), worth $65.3 million. The number of hedge funds having stakes in the company remained the same in the previous quarter, with a total stake value of $36.8 million.
3. Express, Inc. (NYSE: EXPR)
Number of Hedge Fund Holders: 16
Market Cap: $389.9 million
Share Price as of September 13: $5.83
Express, Inc. (NYSE: EXPR) is an American fashion retailer and an apparel brand that caters to young men and women. The company ranks third on our list of the best cheap small-cap stocks to buy. Express, Inc. (NYSE: EXPR) was founded in 1980 and has headquarters in Ohio, U.S.
In June, B. Riley lifted its price target on Express, Inc. (NYSE: EXPR) to $4.50, while keeping a ‘Buy’ rating on the shares. The firm’s analyst appreciated the management for focusing on location and experience while reducing store sizing. In Q2 2021, Express, Inc. (NYSE: EXPR) posted an EPS of $0.02, beating the consensus by $0.32. The company generated $457.6 million in revenue, up 86.3% from the prior-year quarter. Since the beginning of the year, Express, Inc. (NYSE: EXPR) delivered a 524.7% return to shareholders, while the stock gained 498.9% in the past year.
As of Q2 2021, we see that hedge funds are also turning bullish on Express, Inc. (NYSE: EXPR), as the number of hedge funds having stakes in the company in the quarter stood at 19, up from 12 in the previous quarter. These stakes are valued at $109.1 million.
2. Ferroglobe PLC (NASDAQ: GSM)
Number of Hedge Fund Holders: 19
Market Cap: $1.63 billion
Share Price as of September 13: $9.16
Ferroglobe PLC (NASDAQ: GSM) stands second on our list of the best cheap small-cap stocks to buy. It is the leading producer of silicon metal and its alloys, along with manganese alloys. The company also combines technological advances for the production processes of industrial and consumer products.
In Q2 2021, Ferroglobe PLC (NASDAQ: GSM) reported revenue of $418.5 million, presenting a 67.4% year-over-year growth. The company generated $37.8 million from operations and returned to a positive net cash flow of $21.6 million during the second quarter. Ferroglobe PLC (NASDAQ: GSM) attributed solid results to strong pricing across all product categories. In June, B. Riley set its price target on Ferroglobe PLC (NASDAQ: GSM) at $5, with a ‘Buy’ rating on the shares. The stock gained 479.7% year to date and 1,808% in the past year.
The number of hedge funds having stakes in Ferroglobe PLC (NASDAQ: GSM) increased to 19 in Q2 2021, compared with 16 in the previous quarter. The total value of these stakes is $145.7 million. Jeremy Hosking’s Hosking Partners is the company’s leading shareholder with 4.48 million shares, worth $27.4 million.
1. Comstock Resources, Inc. (NYSE: CRK)
Number of Hedge Fund Holders: 20
Market Cap: $2.008 billion
Share Price as of September 13: $8.63
Comstock Resources, Inc. (NYSE:CRK) is an American energy company that is engaged in the acquisition, exploration, and development of natural gas and oil. In addition to this, the company is also focused on its drilling activities to expand the natural gas development in the U.S. Comstock Resources, Inc. (NYSE: CRK) tops our list of the best cheap small-cap stocks to buy.
In July, Mizuho lifted its price target on Comstock Resources, Inc. (NYSE: CRK) to $10, with a ‘Buy’ rating on the shares. The firm’s analyst Vincent Lovaglio believes that the company’s natural gas exploration and development has higher potential as compared to oil exploration. In Q2 2021, Comstock Resources, Inc. (NYSE: CRK) posted an EPS of $0.22, beating the consensus by $0.05. The company’s revenue for the quarter stood at $343.6 million, showcasing 91.4% year-over-year growth. Since the beginning of the year, Comstock Resources, Inc. (NYSE: CRK) delivered an 88.9% return, while its 12-month returns stood at 71.8%.
As of Q2 2021, 20 hedge funds tracked by Insider Monkey have positions in Comstock Resources, Inc. (NYSE: CRK), worth $145.7 million. The number of hedge funds is up from 14 in the previous quarter, with a total value of $75.5 million. Encompass Capital Advisor is the company’s leading shareholder, with 3.7 million shares, worth $25.3 million.
You can also take a look at 15 Best Small-Cap Healthcare Stocks to Buy and 10 Best Small Cap Stocks to Buy in 2021
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Disclosure: None. 10 Cheap Small-Cap Stocks to Buy is originally published on Insider Monkey.
