In this article we will take a look at the 10 best nano cap stocks to buy in 2021.
Small companies with market capitalizations of less than $50 million tend to witness a lot of growth after a recession because investors seem willing to take risks on the back of positive sentiment afforded by improving market conditions. In fact, small companies, represented in the Russell 2000 index – an index of 2,000 small-cap companies – have generally outperformed the wider market. Statistics of the past year underline that small firms offered investors more than 93% returns to the 58% returns offered by bigger firms listed on the Russell 1000 index.
Investing in Nano Cap Stocks
These small firms usually have undervalued stocks for a number of reasons. The first is that nano cap stocks have reporting gaps because of little coverage by financial analysts. Some small firms also have unaudited documents as they fly under the radar and investors should be wary of risking their money on uninformed bets on these companies. However, if a high-quality nano cap firm which has no such issues can be identified, the returns on the investment would be more decidedly more profitable than putting the same amount of money in a larger firm.
Two top finance minds, Eugene Fama and Kenneth French, who teach at the University of Chicago, have attempted to understand this phenomenon. Their research explores the small-cap effect – the tendency of smaller stocks to do better in the market than the ones of large companies. The findings, called the Fama-French model, recommend three factors on which small companies should be evaluated: size, market value, and excess returns. Six weight portfolios are based on these three factors to make decision-making easier.
However, a counter argument to this model contends that scale and diversification are the only important factors to be considered before investments in large firms. Academic debates aside, it is widely accepted that small firms offer investors handsome returns. They are also good for investment because they offer the chance for smaller investors to test their market skills and build their portfolio. Better understanding of the smaller markets leads to a much better overall understanding of the bigger companies and the risks and rewards associated with them.
One thing that investors should still be mindful of is that smaller companies are more susceptible to the broader changes in the economic conditions. For example, they are more at risk of being completely shuttered if a financial crisis hits. The topsy-turvy nature of technology stocks has also complicated matters. It has now become extremely difficult for even the experts to predict the direction of the market at any given point in time. The clearest evidence of this can be made clear by taking a deeper look at hedge funds.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. 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.
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With this context in mind, here is our list of 10 best nano cap stocks to buy in 2021. Apart from these firms, some others, like Cyclo Therapeutics, Inc. (NASDAQ: CYTH) and Bellerophon Therapeutics, Inc. (NASDAQ: BLPH), deserve a special mention as well.
Best Nano Cap Stocks to Buy Now
10. Ever-Glory International Group, Inc. (NASDAQ: EVK)
Number of Hedge Fund Holders: 2
Ever-Glory International Group, Inc. (NASDAQ: EVK) is a China-based firm that offers supply chain solutions and retailing of fashion apparel through a variety of sub-brands. The firm also has stakes in development, design, sampling, sourcing, quality control, manufacturing, logistics, customs clearance, and distribution of garment and accessories. It operates in more than 20 provinces across China and owns more than 900 stories, less than third of which are flagship stores. The firm is placed tenth on our list of 10 best nano cap stocks to buy for 2021.
It has a market cap of more than $35 million and posted $267 million in annual revenue in 2020, a decrease of more than $120 million compared to 2019 as the pandemic hit the business. The share price of Ever-Glory has a 52-week range between $8.3 and $0.6, highlighting a risky but rewarding investment opportunity. Earlier this month, the company reported that its revenue had declined in the second quarter driven by a 30% decrease in retail business. However, the company CEO said at the time that he remained confident of future growth prospects.
9. Happiness Biotech Group (NASDAQ: HAPP)
Number of Hedge Fund Holders: 3
Happiness Biotech Group (NASDAQ: HAPP) is a China-based dietary supplements producer concentrating on the research, development, manufacturing and marketing of Chinese herbal extracts and products made from them. These include lucidum spore powder products, cordyceps mycelia products, ejiao solution products, vitamins, American ginseng products, and others. Happiness Biotech markets to domestic as well as international customers and is placed ninth on our list of 10 best nano cap stocks to buy for 2021.
It has a market cap of over $48.9 million and posted a revenue of more than $20 million for the six month period beginning April 2020 and ending September 2020, a decrease of more than 30% compared to the previous year as the pandemic sales both in China and overseas. The 52-week price range of Happiness Biotech stock lies between $3.3 and $1.6. However, the price jumped more than 4% earlier this month as the company reported e-commerce sales of more than $14 million, the highest since it established an e-commerce section last year.
8. Four Seasons Education (Cayman) Inc. (NYSE: FEDU)
Number of Hedge Fund Holders: 1
Four Seasons Education (Cayman) Inc. (NYSE: FEDU) is a Shanghai-based educational company that offers after-school education services concentrating on elementary school math. The company also provides physics, chemistry, and languages courses to middle school and kindergarten students. It was founded in 2007 and is operational in more than 11 cities across China, running morethan 50 learning centers. It was founded in 2007 and is placed eighth on our list of 10 best nano cap stocks for 2021.
Four Seasons Educational has a market cap of more than $49 million and posted an annual revenue of $55.6 million in February 2020, up more than $5 million compared to the previous year. The company stock has a 52-week price range of $2.6-$0.6. Earlier this year, the share price fell as the company disclosed ownership details. Since then, the sell-off of company stock has increased. However, this seems like a good opportunity to buy as the firm is expected to bounce back from this setback soon.
7. Virco Mfg. Corporation (NASDAQ: VIRC)
Number of Hedge Fund Holders: 3
Virco Mfg. Corporation (NASDAQ: VIRC) is a California-based furniture company that concentrates on the educational market. The products that the company manufactures and sells include chairs, office computers, tables; and other administrative furniture, including desks, returns, bookcases, storage cabinets, and other items. Although it mainly serves academic institutes, it also provides services for government facilities and places of worship. It was founded in 1950 and is placed seventh on our list of 10 best nano cap stocks to buy for 2021.
It has a market cap of more than $49.1 million and posted $133 million in revenue for a nine month period beginning February 2020 and ending October 2020, a 19% decrease compared to the previous year. The 52-week share price range of the firm lies between $4.6-$1.9. In March 2020, the company issued a press release stating that it had resumed operations serving the schools in California as part of an easing of government regulations on some businesses as the American economy slowly reopens following the pandemic.
6. Sotherly Hotels Inc. (NASDAQ: SOHO)
Number of Hedge Fund Holders: 2
Sotherly Hotels Inc. (NASDAQ: SOHO) is a Virginia-based real estate investment trust that concentrates on the acquisition, renovation, and repositioning of upscale hotels. The trust has stakes in more than twelve hotel properties that comprise more than 3,000 rooms. The company portfolio boasts of names such as the Hilton Worldwide, Hyatt Hotels Corporation, and Marriott International, as well as other smaller hotels. It was founded in 2004 and is placed sixth on our list of 10 best nano cap stocks to buy for 2021.
Sotherly has a market cap of more than $44.6 million. In 2020, the trust posted a revenue of more than $70 million, a decrease of more than 62% compared to the previous year as the COVID-19 pandemic hit the hotel industry. The 52-week share price of the trust was $4.4-$1.9. However, as the vaccine rollout spreads and the economy reopens, the hotel industry is expected to make a strong comeback. Sotherly Hotels, with so many luxury establishments under its portfolio, will be a top beneficiary of this.
5. Hudson Global, Inc. (NASDAQ: HSON)
Number of Hedge Fund Holders: 1
Hudson Global, Inc. (NASDAQ: HSON) is a Greenwich-based management consulting company operating in the US, Asia, and Europe. It provides middle and large cap companies talent solutions. It also offers recruitment outsourcing to government agencies The firm was founded in 1999. It is placed fifth on our list of 10 best nano cap stocks for 2021. The company employs a consultative approach to design recruitment solutions, factoring in growth initiatives and expectations of both the employer and prospective employees.
Hudson Global has a market cap of more than $47.3 million and posted a revenue of more than $100 million in the fiscal year ended December, 2020, an increase of 8% compared to 2019. The 52-week price range of the firm lies between $19-$8. Analysts expect the company to achieve profitability this year. The firm has no debt on balance sheets which eases financial burden on the firm and also lessens the potential risk for investors as they seek to profit off this nano cap stock that is poised for handsome growth this year.
4. Live Ventures Incorporated (NASDAQ: LIVE)
Number of Hedge Fund Holders: 1
Live Ventures Incorporated (NASDAQ: LIVE) is a Las Vegas-based holding firm that has stakes in the floor manufacturing, steel manufacturing, and retail businesses in the United States. The products that the flooring section markets include carpets and rugs. The steel section makes and sells deluxe alloy plates, deluxe tool steel plates, precision ground flat stock products, and drill rods. The retail department of the firm deals in movies, video games, music products, books, toys, and other collectible items. The firm also has a directory listing service. Live was founded in 1968 and features fourth on our list of 10 best nano cap stocks for 2021.
It has a market cap of over $46.2 million and posted a revenue of $62.5 million in the last quarter of 2020, an increase of more than 49% compared to the previous quarter. The main chunk of this increase came from the sales of flooring products. The 52-week share price of the firm touched a high of $36 and a low of $5.2. Earlier this year, the share price jumped 41% after social media users referred to Live as the next GameStop, a video game retailer whose share price soared dramatically a couple of months ago.
3. Asia Pacific Wire & Cable Corporation Limited (NASDAQ: APWC)
Number of Hedge Fund Holders: 1
Asia Pacific Wire & Cable Corporation Limited (NASDAQ: APWC) is a Taiwan-based fiber-optic cable manufacturing company. It operates in the Asia Pacific, serving Singapore, Thailand, Australia, and China. In addition to fiber-optic cables, it also markets telecommunication products, low-voltage power cables used to transmit electricity, and installation of street lights. The company has contracts with several governments, electric power companies, and telecommunications giants. It is placed third on our list of 10 best nano cap stocks for 2021.
The firm has a market cap of over $46.5 million. The company posted a revenue of more than $120 million at the end of a six month period beginning January 2020 and ending June 2020. The 52-week share price range of Asia Pacific Wire lies between $8.8-$0.95, indicating that the stock is a high-risk, high-reward one. Last year, it acquired a $6 million loan from its majority shareholder, Pacific Electric Wire & Cable Ltd, to fund company expenditure, funds for business projects, and other corporate uses.
2. ION Geophysical Corporation (NYSE: IO)
Number of Hedge Fund Holders: 4
ION Geophysical Corporation (NYSE: IO) is a Texas-based company that offers a variety of services to the oil and gas industry. The firm provides expertise related to equipment acquisition, software-related matters, data libraries, and planning services. The technology that the firm markets can provide high-resolution images of the surface beneath the earth to exploration companies. ION Geophysical has an international presence with offices in the United States, Canada, Latin America, Europe, Africa, Russia, China and the Middle East.
It has a market cap of more than $43 million and an annual revenue of over $122 million. Last year, the revenue of the firm recorded a 30% decrease compared to the previous twelve months because of the COVID-19 pandemic. The 52-week share price range of the firm hovers between $5.3-$1.2. Earlier this year, the share price of ION jumped by 17% after the company announced the deployment of Gemini, a new source technology for oil firms. Last month, the price jumped by 22% after a big Middle East oil giant extended a contract for Gemini.
1. Harbor Custom Development, Inc. (NASDAQ: HCDI)
Number of Hedge Fund Holders: N/A
Harbor Custom Development, Inc. (NASDAQ: HCDI) is a Washington-based real estate firm that works on development projects related to residential lots, home communities, and family properties. The firm oversees all aspects of land development, including acquisition, entitlements, construction, marketing, sales, and even the management of numerous projects. It was founded by Sterling Griffin in 2014 under a different name. Harbor Custom Development is placed first on our list of ten best nano cap stocks for 2021.
The firm has a market cap of over $45 million and at the end of the financial year in 2020, it posted a revenue of $50.4 million, up 63% from the previous year. The numbers represent the increase in demand for the services that the company offers. The 52-week share price of the company touched a high of $8.3 and a low of $2.6. Earlier this month, the price soared as the company announced it had secured more than $6.3 million in financing from Washington Federal, Inc. (NASDAQ: WAFD) for development on a single-family home project.
You can also take a peek at 10 Best Biotech Stocks To Buy For 2021, and Top 10 Best Freelancing Platforms and Websites for 2021.
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Disclosure: None. 10 Best Nano Cap Stocks to Buy in 2021 is originally published on Insider Monkey.
