In this article, we discuss the 5 best small-cap stocks to buy for 2022. If you want to read our detailed analysis of these stocks, go directly to 10 Best Small Cap Stocks To Buy for 2022.
5. Global Ship Lease, Inc. (NYSE:GSL)
Number of Hedge Fund Holders: 14
Global Ship Lease, Inc. (NYSE:GSL) is a London-based shipping company that leases containerships to companies at fixed rates. Since the supply chain crunch experienced by the globe during the pandemic, shipping stocks recorded surges in share price. As of February 8, Global Ship Lease, Inc. (NYSE:GSL) grew 106.01% in the last 12 months, and 12.88% in the last 3-month period. The company also offers a solid 3.69% dividend yield to shareholders as of February 8, 2022.
On November 11, B. Riley analyst Liam Burke raised the firm’s price target on Global Ship Lease, Inc. (NYSE:GSL) to $33 from $28 and maintained a ‘Buy’ rating on the shares, stating that the company’s cash flow from operating activities reported an increase for the first three quarters of 2021.
14 hedge funds were bullish on Global Ship Lease, Inc. (NYSE:GSL) stock at the close of the third quarter, holding positions worth roughly $100 million. This is in comparison to 18 hedge funds with bullish bets on the company stock a quarter earlier.
Investment firm Massif Capital talked about Global Ship Lease, Inc. (NYSE:GSL) in its Q4 2021 investor letter. Here’s what the fund said:
“We initiated a 6% position in GSL, bringing total maritime transit exposure up to ~9% of the portfolio when combined with our 3% SBLK position. GSL is a containership owner, leasing ships to container companies (such as a Maersk) at fixed rates. As owners, they own and manage the vessels (responsible for crews, maintenance, insurance) but do not have fuel costs. GSL focuses on mid-size to smaller containerships, which serve the faster-growing inter-regional trade routes that represent ~70% of global containerized trade volume.
As they own its containers, their business is both pro-cyclical (chartered tonnages used as growth platform by liner shipping companies) and counter-cyclical (with the sale and lease-back structures used by liner companies as a balance sheet management tool). GSL has a track record that includes both organic acquisitions and a strategic combination in Q4 2018 that doubled the size of the fleet.
We like GSL because they do not have as much operational leverage as a company like ZIM (which leases on both sides of the trade), and they sign 2–5-year contracts. Liners have been eager to secure that capacity for extended durations spanning multiple years, significantly longer than has been the case historically and well-aligned with GSL’s strategic preference to lock in value over time and provide forward visibility on cash flows…” (Click here to see the full text)
4. IDT Corporation (NYSE:IDT)
Number of Hedge Fund Holders: 10
IDT Corporation (NYSE:IDT) is a US-based telecom company that offers money transfer, mobile top-up, and unified communication services. As of February 8, shares of IDT Corporation (NYSE:IDT) have gained 114.91% in the last 12 months. 10 hedge funds reported ownership of IDT Corporation (NYSE:IDT) shares at the close of the third quarter, with combined stakes worth $101.48 million. In comparison, 13 hedge funds held stakes worth $91.86 million in the company at the close of Q2 2021.
In February, IDT Corporation (NYSE:IDT) announced that its money transfer service BOSS Money has expanded in Africa, which will enable US customers to send money to Sierra Leone and Togo. Customers in the United States can now send money to 22 African countries through IDT Corporation (NYSE:IDT), with pick-up or cash deposit available at over 215,000 locations.
In January, IDT Corporation (NYSE:IDT) made further headway by acquiring a majority stake in Sochitel, a global digital distribution platform that offers mobile top-ups, electronic vouchers and other fintech services. This will allow IDT Corporation (NYSE:IDT) to build on Sochitel’s dominant footprint in Africa, and increase its digital payment services in the continent.
IDT Corporation (NYSE:IDT) also signed a strategic partnership with AVANT in December, which is the US’s premier distributor of next-gen technologies. Through this deal, Avant will offer IDT’s net2phone communication and collaboration solutions to the US and international customers through their global network of trusted advisors.
IDT Corporation (NYSE:IDT) boasts three growth subsidiaries through each of its segments offering money transfer, point of sale (POS), and unified communications services. After the recent spinoff of the company’s net2phone segment, IDT Corporation (NYSE:IDT) management is now considering the establishment of Mobile Top-Up as a separate segment, which holds the potential to be worth almost twice the company’s current stock price in a 2-year period.
Alta Fox Capital discussed IDT Corporation (NYSE:IDT) in its Q3 2021 investor letter, stating:
“In July, we published our research on IDT Corporation (IDT). IDT is the investment we have spent the most cumulative research time on this year. Researching this business has been a fascinating deep dive into various operating businesses and a management team and Board that we believe are some of the greatest capital allocators of all time. In September, we announced a private deal to purchase 2.5% of NRS, a subsidiary of IDT, for $10 million. For reasons highlighted in our original IDT report, we believe NRS has the potential to be worth a couple of billion dollars in a few years, multiples of the entire IDT enterprise value today.”
3. Global Blood Therapeutics, Inc. (NASDAQ:GBT)
Number of Hedge Fund Holders: 23
Global Blood Therapeutics, Inc. (NASDAQ:GBT), a clinical-stage biopharmaceutical company, is a top small-cap stock to buy in 2022. The firm develops treatments to treat sickle-cell disease and other blood-based disorders. FDA recently approved Global Blood Therapeutics, Inc.’s (NASDAQ:GBT) Oxbryta tablet, an oral therapy to treat Sickle Cell Disease for children aged 4 to 11. In December, Stifel analyst Benjamin Burnett reiterated a Buy rating on Global Blood Therapeutics, Inc. (NASDAQ:GBT) shares, setting a $68 price target. The analyst sees Oxbryta’s approval in the US for pediatric use, as well as a probable European Union approval for adult use, delivering strong peak sales as sickle cell disease patients number roughly the same in the EU and the USA.
Perceptive Advisors is the leading shareholder of Global Blood Therapeutics, Inc. (NASDAQ:GBT) stock, with 4.4 million shares worth $112.3 million, as of the end of September. The hedge fund has increased its stake in Global Blood Therapeutics, Inc. (NASDAQ:GBT) by 7% over the previous quarter.
The gradual easing of headwinds caused by the Covid pandemic will afford further growth opportunities for the company, with its research and development pipeline also positioned to deliver value for investors. Investors were seen loading up on Global Blood Therapeutics, Inc. (NASDAQ:GBT) stock at the close of the third quarter, with 23 hedge funds bullish on the stock, as compared to 16 in the preceding quarter.
2. Portillo’s Inc. (NASDAQ:PTLO)
Number of Hedge Fund Holders: 15 (as of Q4)
Portillo’s Inc. (NASDAQ:PTLO) is a reputable name in the Chicago street food industry and operates quick services restaurants across the United States. The firm went public through an IPO in October 2021, trading on the NASDAQ stock exchange at $27.05 as of February 8, which is a 35% increase from its initial share price of $20.
In December, Portillo’s Inc. (NASDAQ:PTLO) was upgraded to ‘Outperform’ from ‘Neutral’ by Baird analyst David Tarantino, maintaining a $50 price target. He feels that the company’s obvious long-term growth opportunity, along with expectations for a healthy near-term operating momentum justify a substantial premium on the company shares.
Portillo’s Inc. (NASDAQ:PTLO) boasts industry-leading average unit volumes, and its current footprint of 69 stores in the United States allows a great opportunity for expansion across the country.
1. The Beauty Health Company (NASDAQ:SKIN)
Number of Hedge Fund Holders: 39
The Beauty Health Company (NASDAQ:SKIN) is a California-based provider of skincare products around the globe, with its propriety products being the HydraFacial and PERK hydra-dermabrasion systems.
On January 7, William Blair analyst Margaret Kaczor initiated coverage of The Beauty Health Company (NASDAQ:SKIN) with an ‘Outperform’ rating and no price target. The analyst sees the company outperforming the broader market, whilst focusing on the “under-penetrated” beauty health market, with its main asset, HydraFacial, only 12% penetrated in the US market. Kaczor expects the company to generate 20%+ growth in the next three to five years, as one of the few pure plays at the intersection of the consumer health and the fast-growing retail beauty segment. Over the next five years, the global demand for skincare products is expected to grow significantly, and The Beauty Health Company (NASDAQ:SKIN) is well-positioned to enjoy this boom.
Out of all the hedge funds tracked by Insider Monkey, 39 were long The Beauty Health Company (NASDAQ:SKIN) at the close of the third quarter, holding stakes of $865.4 million. This shows a positive trend from last quarter, where 33 hedge funds held stakes worth $665.23 million in the company.
Baron Funds, an investment management firm, talked about many stocks in its Q3 2021 investor letter, and The Beauty Health Company (NASDAQ:SKIN) was one of them. Here’s what the fund said:
“The Beauty Health Company is an innovative skin care and aesthetics company providing consumers the benefits of a professional medical treatment with the experience of a consumer brand. Shares outperformed in the third quarter following better-than-expected earnings results and the announcement of two new retail partnerships with Nordstrom and Ulta, where the company expects to sell an aesthetics device that customers can use in their home. We continue to be attracted to the company’s assetlight, recurring revenue business model and see the company doubling its revenues organically over the next few years. We also believe that Beauty Health will boost shareholder value over time through accretive acquisitions.”
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