In this piece, we will take a look at the ten small cap stocks that are too cheap to ignore. If you want to jump ahead to the top five stocks in this list, then take a look at 5 Small Cap Stocks That Are Too Cheap To Ignore.
Small cap companies often also have strong growth potential, as their market performance and share prices are left with an upside for performance. While Apple might find it hard to grow its market share by say 15%, a small cap company can easily do this since its existing operations are unlikely to capture the full target addressable market (TAM). This performance is reflected in the fact that between 2000 and 2017, while the S&P 500 index grew by 100%, the S&P 600 SML index outpaced it significantly by growing at a whopping 350%.
Additionally, these stocks also offer the retail investor a chance to invest without being outplayed by the larger institutional investors, since financial regulators often prevent hedge funds and others from investing heavily in these companies. This then prevents large price movements that accompany a fund buying large chunks of shares. The funds are also discouraged from buying their shares, as a limited number of outstanding stock means that they would have to buy as much as 20% of the entire outstanding shares in order for the purchase to reflect a meaningful change on the investment portfolio.
However, like all investments, small stocks are also accompanied by their fair share of risks. For instance, investors should be wary of low liquidity, which makes these shares harder to sell at a high price and conversely, harder to buy at a low price. Furthermore, since small companies do not often receive significant media or analyst attention, researching them is tedious and time consuming due to a dearth of readily available analyst reports and other information. This makes investing in them risky since the investor themselves have to conduct the research, and the importance of research is also compounded by the very nature of these companies since some of them might not have profitable business models or strong balance sheets.
Today’s piece will take a look at small cap stocks that are cheap, and the top picks are Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX), United States Steel Corporation (NYSE:X), and Green Plains Inc. (NASDAQ:GPRE).
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
We took a broad look at the countless small stocks in the industry and sifted them out on the basis of their financial performance, market strength, and product portfolio. They were then ranked through Insider Monkey’s Q2 2022 survey of 895 hedge funds.
10 Small Cap Stocks That Are Too Cheap To Ignore
10. Oppenheimer Holdings Inc. (NYSE:OPY)
Number of Hedge Fund Holders: 6
Oppenheimer Holdings Inc. (NYSE:OPY) is a financial services company that provides brokerage and investment banking services. These include providing money market options, securities, portfolio management programs, and mutual fund services. The fund is based in New York, New York, the United States.
Oppenheimer Holdings Inc. (NYSE:OPY) is currently trading at a price to earnings ratio (P/E) of 4.77x, which is significantly lower than the firm’s three year historical average P/E ratio of 6.4x. The company is also on the path to an aggressive share buy back program, which will further drive up its share price. Oppenheimer Holdings Inc. (NYSE:OPY) repurchased 413,052 shares during its third fiscal quarter.
Oppenheimer Holdings Inc. (NYSE:OPY)’s shares have appreciated by 5% over the past month, and the firm pays a 15 cent dividend for a 1.83% yield. Six out of the 895 hedge funds portfolio polled by Insider Monkey for their second quarter of 2022 holdings had held a stake in the company.
Oppenheimer Holdings Inc. (NYSE:OPY)’s largest investor is Jim Simons’ Renaissance Technologies which owns 88,900 shares that are worth $2.9 million.
Oppenheimer Holdings Inc. (NYSE:OPY), United States Steel Corporation (NYSE:X), Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX), and Green Plains Inc. (NASDAQ:GPRE) are some of the top small cap stocks that are too cheap to ignore.
9. Safe Bulkers, Inc. (NYSE:SB)
Number of Hedge Fund Holders: 9
Safe Bulkers, Inc. (NYSE:SB) is a dry bulk transportation services provider that ships goods such as coal, iron ore, and grain. The company operates 40 vessels and is headquartered in Monaco.
Safe Bulkers, Inc. (NYSE:SB) has a P/E ratio of 1.63, which is lower than the maritime shipment sector’s ratio of 2.2. Additionally, the firm’s price to operating cash flow ratio of 1.25 is almost half of the industry average of 2.5x. Safe Bulkers, Inc. (NYSE:SB) has also grown its revenues at a compounded annual growth rate (CAGR) of 23% over the last five years. It is also waiting on the delivery of nine new vessels which will help drive down its costs since they will be able to operate on heavy oil.
Safe Bulkers, Inc. (NYSE:SB) pays a 5 cent dividend for a 7.55% yield, and by the end of this year’s second quarter, nine out of the 895 hedge funds polled by Insider Monkey had bought the company’s shares.
Safe Bulkers, Inc. (NYSE:SB)’s largest investor is Jim Simons’ Renaissance Technologies which owns 3.9 million shares that are worth $14.9 million.
8. Himax Technologies, Inc. (NASDAQ:HIMX)
Number of Hedge Fund Holders: 9
Himax Technologies, Inc. (NASDAQ:HIMX) is a Taiwanese semiconductor company. It sells display drivers and other components that are used in televisions, power management products for gadgets, and displays for augmented reality devices.
Himax Technologies, Inc. (NASDAQ:HIMX) has grown its revenue by a CAGR of 18% between 2017 and 2021, making it among the top 6% of the firms that have managed to do so between 1950 and 2015. During the same time period, the firm has also controlled its costs and grown its profit margin from a mere 1.2% to a more respectable 35.2%. If you thought this was the end of it, then you’d be wrong, as between 2017 and 2021, Himax Technologies, Inc. (NASDAQ:HIMX)’s net income has grown at a CAGR of 73%.
Insider Monkey’s June quarter of 2022 survey that covered 895 hedge fund portfolios revealed that nine funds had held a stake in Himax Technologies, Inc. (NASDAQ:HIMX).
Out of these, Jonathan Guo’s Yiheng Capital is Himax Technologies, Inc. (NASDAQ:HIMX)’s largest investor. It owns 6.4 million shares that are worth $48 million.
7. Addus HomeCare Corporation (NASDAQ:ADUS)
Number of Hedge Fund Holders: 13
Addus HomeCare Corporation (NASDAQ:ADUS) is an American healthcare company that provides personal care services to the elderly, chronically ill, and disabled persons. The firm is headquartered in Frisco, Texas.
Addus HomeCare Corporation (NASDAQ:ADUS)’s second quarter results saw the firm bring in $237 million in revenue which marked 8.7% in growth. During the same time period, its same store revenue growth from home health services stood at a stronger 22%. All these led to Addus HomeCare Corporation (NASDAQ:ADUS) reporting a free cash flow of $56 million for a 7.7% yield that marked another 4.1% annual increase.
Addus HomeCare Corporation (NASDAQ:ADUS)’s shares have appreciated by 12.5% year to date. By the end of this year’s second quarter, 13 out of the 895 hedge funds polled by Insider Monkey had bought its shares.
Addus HomeCare Corporation (NASDAQ:ADUS)’s largest investor is Brian Ashford-Russell and Tim Woolley’s Polar Capital which owns 346,397 shares that are worth $28 million.
6. World Fuel Services Corporation (NYSE:INT)
Number of Hedge Fund Holders: 15
World Fuel Services Corporation (NYSE:INT) is a fuel distributor that is headquartered in Miami, Florida, the United States. The company sells fuel to airlines, governments, and military customers.
World Fuel Services Corporation (NYSE:INT) reported $15.7 billion in revenue and $100 million in operating income for its third fiscal quarter, during which the firm doubled the operating income over the previous quarter, while its revenue grew by 88% annually. The quarter also marked World Fuel Services Corporation (NYSE:INT) shipping 1.8 billion gallons of fuel to the aviation industry, marking a recovery from the pandemic. However, despite this, the volume stood at 82% of pre pandemic levels, implying that there’s still some growth left.
World Fuel Services Corporation (NYSE:INT) pays a 14 cent dividend for a 2.29% yield. Insider Monkey’s Q2 2022 survey of 895 hedge funds outlined that 15 had owned a stake in the company.
Out of these, Ali Motamed’s Invenomic Capital Management is World Fuel Services Corporation (NYSE:INT)’s largest investor through a $19 million stake that comes via 966,902 shares.
Along with Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX), United States Steel Corporation (NYSE:X), and Green Plains Inc. (NASDAQ:GPRE), World Fuel Services Corporation (NYSE:INT) is a top cheap small cap stock.
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Disclosure: None. 10 Small Cap Stocks That Are Too Cheap To Ignore is originally published on Insider Monkey.
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