10 Small Cap Stocks That Are Too Cheap To Ignore

In this piece, we will take a look at the ten 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.

5. Veritiv Corporation (NYSE:VRTV)

Number of Hedge Fund Holders: 17

Veritiv Corporation (NYSE:VRTV) is a business packaging products and services provider that lets its customers buy packaging materials, build clean rooms, and procure commercial printing papers. The firm is headquartered in Atlanta, Georgia.

Veritiv Corporation (NYSE:VRTV) reported $1.82 billion in revenue during its second fiscal quarter, which marked a strong 9.6% annual growth in a quarter that was marked with high inflation. The firm also surprised analysts by increasing its guidance for earnings per share and operating income. Previously, it had expected to bring in EPS ranging between $18 – $21, and the new guidance raised this to $19.5 – $21.5. The operating income guidance was raised to $475 million – $505 million from an earlier $445 million – $485 million.

As part of their second quarter of 2022 investments, 17 out of the 895 hedge funds polled by Insider Monkey had held a stake in Veritiv Corporation (NYSE:VRTV).

Veritiv Corporation (NYSE:VRTV)’s largest investor is Seth Klarman’s Baupost Group which owns 3.5 million shares that are worth $386 million.

4. Urban Outfitters, Inc. (NASDAQ:URBN)

Number of Hedge Fund Holders: 21

Urban Outfitters, Inc. (NASDAQ:URBN) is a consumer product wholesaler and retailer. The firm sells products such as footwear, apparel, and beauty products through its retail and wholesale stores. It is headquartered in Philadelphia, Pennsylvania.

Urban Outfitters, Inc. (NASDAQ:URBN)’s price to earnings and enterprise value to operating income operating income ratios sit at 7x each, which are lower than the sector average of 64x P/E and 14.7x EV/EBITDA ratios. This implies that there is room left for the stock to grow, as its valuation catches up with peers. JPMorgan raised the company’s share price target to $23 from $20 in September 2022, as it shared that the sector as a whole is optimistic about a recovery.

As this year’s second quarter ended, 21 out of the 895 hedge funds polled by Insider Monkey had bought a stake in Urban Outfitters, Inc. (NASDAQ:URBN).

Urban Outfitters, Inc. (NASDAQ:URBN)’s largest investor is John Overdeck and David Siegel’s Two Sigma Advisors which owns 957,700 shares that are worth $17 million.

3. Green Plains Inc. (NASDAQ:GPRE)

Number of Hedge Fund Holders: 22

Green Plains Inc. (NASDAQ:GPRE) is an American ethanol and commodities distributor. The firm provides ethanol to other companies and it also sells natural gas, grain, and corn oil.

Green Plains Inc. (NASDAQ:GPRE) is one of America’s largest ethanol producers, and as 2021 ended, the firm had pumped out 1 billion gallons of ethanol, alongside 290 million pounds of industrial grade corn oil, and 330 million bushels of corn. The company is also slated to add 200,00 tons of ultra high protein capacity next year, along with another 162,000 tons in 2024. This implies that when paired with reducing capital expenditure, the firm’s free cash flows are estimated to sit at $190 million in 2024. At the same time, its debt ratio can also fall below 1.4x, for a strong balance sheet.

Insider Monkey’s Q2 2022 survey covering 895 hedge funds revealed that 22 had invested in Green Plains Inc. (NASDAQ:GPRE).

Out of these, Green Plains Inc. (NASDAQ:GPRE)’s largest investor is Frederick Disanto’s Ancora Advisors which owns four million shares that are worth $109 million.

2. United States Steel Corporation (NYSE:X)

Number of Hedge Fund Holders: 30

United States Steel Corporation (NYSE:X) sells flat rolled and tubular steel products in both Europe and North America. The firm serves the needs of a wide variety of industries such as automotive, construction, transportation, and container manufacturers. It is headquartered in America’s Steel City.

United States Steel Corporation (NYSE:X) has a fortress of a balance sheet, as close to 80% of its total debt is due in and after 2029 – lending the firm a stable profile during today’s turbulent macroeconomic environment. Including this, the firm has ample liquidity of $5.8 billion, out of which $3.4 billion is represented by cash and equivalents. United States Steel Corporation (NYSE:X) also regularly buys back its own shares, and since the fourth quarter of last year, it has bought back $850 million worth of shares.

United States Steel Corporation (NYSE:X) pays a 5 cent dividend for a 0.98% yield. As this year’s June quarter ended, 30 out of the 895 hedge funds polled by Insider Monkey had bought its shares.

United States Steel Corporation (NYSE:X)’s largest investor is Eric W. Mandelblatt’s Soroban Capital Partners which owns 11 million shares that are worth $209 million.

1. Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX)

Number of Hedge Fund Holders: 31

Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) is a healthcare information technology solutions services provider. These include providing services such as financial and administrative aid to private clinics and the military.

Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX) has a large network of healthcare providers, through which the company directly serves 80,000 physicians and 300,000 more through extended partnerships. Additionally, the firm’s healthcare plan network stands at 35 million strong, without the addition of new members through a recent deal with the Social Security Administration. The firm’s revenue during its second quarter grew by 7% annually and stood at $151 million, beating analyst estimates and it aims to bring in $120 million in free cash flow by the end of this year.

Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 31 had invested in Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX).

Out of these, Ken Fisher’s Fisher Asset Management is Allscripts Healthcare Solutions, Inc. (NASDAQ:MDRX)’s largest investor through an $81 million stake that comes via 5.4 million shares.

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Disclosure: None. 10 Small Cap Stocks That Are Too Cheap To Ignore is originally published on Insider Monkey.