5 Must-Buy Small Cap Stocks to Buy

4. Compass Diversified Holdings (NYSE:CODI)

Number of Hedge Fund Holders: 21

Year-To-Date Performance: 127.53%

Market Capitalization: $796.00 million

Stock Upside: 20.51%

Compass Diversified Holdings (NYSE:CODI) is one of the must-buy small cap stocks to buy. On March 30, Compass Diversified Holdings (NYSE:CODI) announced it had signed a definitive agreement to sell the foodservice business of its subsidiary, SternoCandleLamp Holdings, Inc., to Archer Foodservice Partners for an enterprise value of $292.5 million. Archer Foodservice Partners is a portfolio company of private equity firm Wynnchurch Capital.

Compass emphasized that it is selling only Sterno’s foodservice operations, not the entire SternoCandleLamp business. Before closing, the company will spin off Sterno’s home fragrance arm and retain it within its own portfolio. It will be operated through a subsidiary called Rimports, LLC.

The asset being sold, Sterno, is a 100-year-old brand headquartered in Texarkana, TX. It is best known for chafing fuel products widely used in catering and hospitality. It also makes buffet accessories, candles, and flameless heating units, mostly manufactured in-house across facilities in Texarkana, Memphis, TN, and La Porte, IN.

According to Compass CEO Elias Sabo, the deal will allow the company to reduce debt. He described the transaction as a critical step in reducing leverage at CODI and part of a broader commitment to “take decisive action – strategically selling businesses, rapidly deleveraging the balance sheet and addressing the gap between the market price and our intrinsic value.”

Compass expects the transaction to close in Q2 2026. This is after regulatory approvals and the execution of a Transition Services Agreement.

Compass Diversified Holdings (NYSE:CODI) is a holding company that acquires and manages controlling stakes in middle-market businesses across branded consumer and industrial sectors. Its portfolio includes subsidiaries involved in manufacturing, consumer products, and industrial services.