In this article, we discuss 10 small-cap stocks to sell now before recession begins.
The United States Department of Commerce released new economic numbers on May 27, stating that the economy contracted 1.5% annualized during the first quarter of 2022. Even though consumer spending rose by 3.1% annualized between January and March, inflationary pressures continued to persist, with the Consumer Price Index jumping by 8.3% in April compared to a year ago, below a four decade high of 8.5% set in March.
The worrying numbers, due in part to the rising trade deficit, reduced the GDP by 3.2% annualized in the first quarter as well. In a drive to slow borrowing and spending, the Fed has hiked interest rates in the short-term and is likely to continue down that path, raising investor concerns around growth and even a recession. Fed chief Jerome Powell has pledged that the central bank is aiming for a “soft landing” in which wages, consumer spending, and growth slow down but the economy avoids a sharp downturn.
However, recession fears persist as prominent investment advisors like Moody’s, Goldman Sachs, and Deutsche Bank forecast an economic slump in 2023 and 2024. Mark Zandi, the chief economist at Moody’s Analytics, recently said that recession risks were “uncomfortably high”. Goldman Sachs chief executive Lloyd Blankfein has also warned of a recession threat recently. In late April, David Folkerts-Landau, the chief economist at Deutsche Bank, forecast a major recession in the US within the next two years.
The higher costs due to inflation and supply chain problems in light of the soaring demand have hit the earnings of companies too, leading to a disappointing earnings season on Wall Street that is comparable to the pandemic lows of 2020. The Russian war in Ukraine, COVID lockdowns in China, and political turmoil elsewhere has increased the risk of recession in global markets as well, with Europe already reeling from the disruption of energy supplies from Russia. Hiring freezes at many organizations are already in place as businesses struggle.
The stock market has been hit with these fears as well, sending the shares of large tech firms like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) to notable lows. In this bleak environment, panicked investors have also started dumping the shares of smaller firms that are more at risk due to market volatility than the larger firms that can withstand pressures. A mass sell-off in the growth sector is already underway.
Our Methodology
These were picked using market capitalizations. Stocks that have a market capitalization between $300 million to $2 billion and have registered notable declines in their share price year-to-date as of May 27 were preferred for the list. The selected companies also operate in sectors that generally do not perform well during a recession. The business fundamentals and analyst ratings of each company are also discussed to provide some additional context.
Hedge fund sentiment was included as a classifier as well. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each company.
Source: pexels
Small-Cap Stocks to Sell Now Before Recession Begins
10. Tattooed Chef, Inc. (NASDAQ:TTCF)
Number of Hedge Fund Holders: 3
Market Cap as of May 27: $540 million
Percentage Decline in Share Price Year-to-Date: 53.52%
Tattooed Chef, Inc. (NASDAQ:TTCF) makes and sells plant-based foods. The firm runs over 14,000 retail outlets across the United States. On May 9, the firm posted earnings for the first quarter of 2022, reporting a revenue of around $72 million, up more than 37% compared to the revenue over the same period last year. The firm reported a net loss of around $17 million for the first three months of 2022. The company had missed market estimates on earnings for the fourth quarter of 2021 as well.
On May 10, Cowen analyst Brian Holland maintained an Outperform rating on Tattooed Chef, Inc. (NASDAQ:TTCF) stock and lowered the price target to $13 from $18, noting that the stock was a “show me” until line extensions validate the brand.
At the end of the first quarter of 2022, 3 hedge funds in the database of Insider Monkey held stakes worth $1.4 million in Tattooed Chef, Inc. (NASDAQ: TTCF), compared to 7 in the preceding quarter worth $5.9 million.
Just like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), Tattooed Chef, Inc. (NASDAQ:TTCF) is one of the stocks feeling the heat of an economic slowdown.
9. Vinco Ventures, Inc. (NASDAQ:BBIG)
Number of Hedge Fund Holders: 9
Market Cap as of May 27: $612 million
Percentage Decline in Share Price Year-to-Date: 5.77%
Vinco Ventures, Inc. (NASDAQ:BBIG) is a Pennsylvania-based consumer products research and development firm. On May 18, the firm had announced that it would be spinning off one unit of the company into a new business focused entirely on crypto development. The spinoff, named Cryptyde, would focus on consumer adoption of smart contract technologies and general disruption of consumer-facing industries, per the company. A planned delay in the spinoff has sent the shares of the firm tumbling in recent days.
Vinco Ventures, Inc. (NASDAQ:BBIG) posted earnings for the first quarter of 2022 on May 23, reporting a revenue of $11.5 million, up more than 348% compared to the revenue over the same period last year.
At the end of the first quarter of 2022, 9 hedge funds in the database of Insider Monkey held stakes worth $7.5 million in Vinco Ventures, Inc. (NASDAQ:BBIG), compared to 10 in the previous quarter worth $6 million.
8. Inovio Pharmaceuticals, Inc. (NASDAQ:INO)
Number of Hedge Fund Holders: 9
Market Cap as of May 27: $405 million
Percentage Decline in Share Price Year-to-Date: 61.72%
Inovio Pharmaceuticals, Inc. (NASDAQ:INO) operates as a biotech firm. The company posted earnings for the first quarter of 2022 on May 10, reporting a revenue of $0.2 million, down more than 45% compared to the revenue over the same period last year. The cash and cash equivalents at the end of the first quarter were $360.4 million, compared to $401.3 million at the end of December 2021. The net losses for the quarter stood at around $79 million, compared to $54 million in the preceding quarter.
On May 11, investment advisory Cantor Fitzgerald maintained an Overweight rating on Inovio Pharmaceuticals, Inc. (NASDAQ:INO) stock and lowered the price target to $3 from $6. Analyst Charles Duncan issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, New York-based firm DE Shaw is a leading shareholder in Inovio Pharmaceuticals, Inc. (NASDAQ:INO) with 5.4 million shares worth more than $19 million.
At the end of the first quarter of 2022, 9 hedge funds in the database of Insider Monkey held stakes worth $23 million in Inovio Pharmaceuticals, Inc. (NASDAQ:INO), the same as in the previous quarter worth $30 million.
7. Blink Charging Co. (NASDAQ:BLNK)
Number of Hedge Fund Holders: 12
Market Cap as of May 27: $613 million
Percentage Decline in Share Price Year-to-Date: 37.51%
Blink Charging Co. (NASDAQ:BLNK) is a Florida-based company that provides electric vehicle charging equipment and related services. On April 26, the company announced that it would be acquiring Electric Blue, a United Kingdom-based EV infrastructure provider, in a deal worth $23 million. Through the purchase, Blink adds nearly 1,150 EV chargers to the global footprint and also enters the EV market in the UK. Blink will add to the existing fleet of chargers offered by Electric Blue presently, per Michael Farkas, the CEO of the former.
On May 13, DA Davidson analyst Matt Summerville kept a Neutral rating on Blink Charging Co. (NASDAQ:BLNK) stock and lowered the price target to $17 from $26, noting that “higher operating expenses driven by incremental technology and personnel investments are expected”.
At the end of the first quarter of 2022, 12 hedge funds in the database of Insider Monkey held stakes worth $9.8 million in Blink Charging Co. (NASDAQ:BLNK), compared to 11 in the previous quarter worth $8.8 million.
Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Blink Charging Co. (NASDAQ:BLNK), with 479,400 shares worth more than $12.6 million.
6. Desktop Metal, Inc. (NYSE:DM)
Number of Hedge Fund Holders: 12
Market Cap as of May 27: $563 million
Percentage Decline in Share Price Year-to-Date: 60.08%
Desktop Metal, Inc. (NYSE:DM) makes and sells additive manufacturing solutions. On May 10, the company posted earnings for the first quarter of 2022, reporting a revenue of $43 million, up over 286% compared to the revenue over the same period last year but missing market expectations by $0.29 million. In guidance numbers for 2022, the firm reiterated a revenue of $260 million against consensus estimates of $255 million. This represents 131% growth compared to the 2021 numbers.
On March 16, Stifel analyst Noelle Dilts maintained a Buy rating on Desktop Metal, Inc. (NYSE:DM) stock and lowered the price target to $6 from $11, noting that the guidance for 2022 was reasonably in line with market expectations.
At the end of the first quarter of 2022, 12 hedge funds in the database of Insider Monkey held stakes worth $34 million in Desktop Metal, Inc. (NYSE:DM), compared to 16 in the preceding quarter worth $55 million.
In addition to Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN), Desktop Metal, Inc. (NYSE:DM) is one of the stocks on the radar of elite investors as recession fears rise.
5. Silk Road Medical, Inc (NASDAQ:SILK)
Number of Hedge Fund Holders: 15
Market Cap as of May 27: $2 billion
Percentage Decline in Share Price Year-to-Date: 26.58%
Silk Road Medical, Inc (NASDAQ:SILK) operates as a medical device company. On May 4, the company posted earnings for the first quarter of 2022, missing market estimates on earnings per share by $0.13 and reporting a revenue of around $28 million, up more than 27% compared to the revenue over the same period last year.
On May 17, Citi analyst Joanne Wuensch maintained a Neutral rating on Silk Road Medical, Inc (NASDAQ:SILK) stock and lowered the price target to $33 from $44, noting that market multiples were contracting due to higher inflation, slowing growth, and rising interest rates.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Deerfield Management is a leading shareholder in Silk Road Medical, Inc (NASDAQ:SILK), with 2.1 million shares worth more than $88 million.
At the end of the first quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $133 million in Silk Road Medical, Inc (NASDAQ:SILK), compared to 12 in the preceding quarter worth $94 million.
4. Skillz Inc. (NYSE:SKLZ)
Number of Hedge Fund Holders: 18
Market Cap as of May 27: $655 million
Percentage Decline in Share Price Year-to-Date: 74.67%
Skillz Inc. (NYSE:SKLZ) owns and runs a mobile gaming platform. On May 4, the firm posted earnings for the first quarter of 2022, missing market estimates on earnings per share by $0.19 and reporting a revenue of $93 million, up 11% compared to the revenue over the same period last year. The company said it expected to end 2022 with an earnings margin above 30% and a revenue of around $400 million, representing 24% year-on-year growth. The firm was founded in 2012 and is based in California.
On May 23, Citi analyst Jason Bazinet downgraded Skillz Inc. (NYSE:SKLZ) stock to Neutral from Buy and lowered the price target to $2.10 from $5, noting that there were concerns around the “efficiency of sales and marketing spend” for the firm.
At the end of the first quarter of 2022, 18 hedge funds in the database of Insider Monkey held stakes worth $154 million in Skillz Inc. (NYSE: SKLZ), the same as in the previous quarter worth $370 million.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Wildcat Capital Management is a leading shareholder in Skillz Inc. (NYSE:SKLZ), with 21 million shares worth more than $64 million.
In its Q3 2021 investor letter, Bireme Capital, an asset management firm, highlighted a few stocks and Skillz Inc. (NYSE:SKLZ) was one of them. Here is what the fund said:
“Another short position we initiated was in Skillz Inc. (NYSE:SKLZ), a mobile game publisher with $230m in 2020 revenue, and $98m of 2020 EBITDA losses. When we shorted it, SKLZ had a ~$6b valuation; it is now down to $4.5b, and we believe it has much more room to fall.
Skillz Inc. (NYSE:SKLZ) is a great example of investors getting hyped up over a quickly-growing company employing misleading industry jargon. In this case, the jargon is “eSports.” eSports is, in fact, a large and growing industry, and the term describes the business of competitive video games. Typically, this involves hosting tournaments, either live or online, where spectators can watch professional gamers compete at high levels. Prize pools are often in the millions. Ticket sales, sponsorships, and advertising revenue from such events totaled over $1b in 2020…” (Click here to see the full text)
3. Victory Capital Holdings, Inc. (NASDAQ:VCTR)
Number of Hedge Fund Holders: 18
Market Cap as of May 27: $1.7 billion
Percentage Decline in Share Price Year-to-Date: 22.05%
Victory Capital Holdings, Inc. (NASDAQ:VCTR) operates as an asset management firm. On May 11, the company reported that assets under management at the end of April were around $166 billion, a fall of 6.8% from the previous month when they had been around $178 billion. However, the firm reported a month-on-month increase in alternative asset class which stood at $4.58 billion, up 14% from $4.03 billion at the end of March. The Solutions AUM fell by 7.6% during the month to $54 billion.
On May 23, B Riley analyst Matt Howlett reiterated a Buy rating on Victory Capital Holdings, Inc. (NASDAQ:VCTR) stock with a price target of $36, noting that the firm had delivered significant growth since inception.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Impax Asset Management is a leading shareholder in Victory Capital Holdings, Inc. (NASDAQ:VCTR), with 972,198 shares worth more than $28 million.
At the end of the first quarter of 2022, 20 hedge funds in the database of Insider Monkey held stakes worth $113 million in Victory Capital Holdings, Inc. (NASDAQ:VCTR), compared to 18 in the preceding quarter worth $129 million.
In its Q4 2021 investor letter, Gator Capital Management, an asset management firm, highlighted a few stocks and Victory Capital Holdings, Inc. (NASDAQ:VCTR) was one of them. Here is what the fund said:
“Although higher interest rates will benefit the Fund’s portfolio, we are making sure that the Fund is not simply a bet on higher rates. We have several large holdings with inexpensive valuations and catalysts unrelated to higher interest rates. Victory Capital Holdings, Inc. (NASDAQ:VCTR) is an asset manager making attractive acquisitions of smaller asset managers, trading at 6x earnings, and returning capital to shareholders through increased dividends and share repurchases.”
2. Wheels Up Experience Inc. (NYSE:UP)
Number of Hedge Fund Holders: 24
Market Cap as of May 27: $556 million
Percentage Decline in Share Price Year-to-Date: 45.10%
Wheels Up Experience Inc. (NYSE:UP) provides private aviation services. The company posted earnings for the first quarter of 2022 on May 12, beating market expectations on earnings per share by $0.06. The revenue over the period was $325 million, up over 24% compared to the revenue over the same period last year and beating estimates by $24 million. The company owns and runs a fleet of around 1,500 aircrafts. It was founded in 2013 and is headquartered in New York.
On May 13, BTIG analyst Marvin Fong maintained a Buy rating on Wheels Up Experience Inc. (NYSE:UP) stock and lowered the price target to $5.5 from $7, noting that margins have been a key issue for the firm but there had been some progress on that front.
At the end of the first quarter of 2022, 24 hedge funds in the database of Insider Monkey held stakes worth $27 million in Wheels Up Experience Inc. (NYSE:UP), compared to 16 in the preceding quarter worth $33 million.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Millennium Management is a leading shareholder in Wheels Up Experience Inc. (NYSE:UP), with 1.5 million shares worth more than $4.8 million.
1. Brinker International, Inc. (NYSE:EAT)
Number of Hedge Fund Holders: 27
Market Cap as of May 27: $1.12 billion
Percentage Decline in Share Price Year-to-Date: 18.98%
Brinker International, Inc. (NYSE:EAT) owns and runs casual dining restaurants. The stock has nosedived in recent weeks as the disappointing earnings of the firm showed the impact of inflation and labor costs on the business. The company missed market expectations on earnings per share for the first quarter of 2022 by $0.11. The diluted EPS forecasts of the firm for 2022 also fell short of analysts’ predictions, with the firm forecasting $3.05 to $3.30 against consensus estimates of $3.48.
On May 9, Stifel analyst Chris O’Cull maintained a Hold rating on Brinker International, Inc. (NYSE:EAT) stock and lowered the price target to $40 from $42, noting that “inflationary pressures continue to impact margin performance” of the firm.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tremblant Capital is a leading shareholder in Brinker International, Inc. (NYSE:EAT), with 1.2 million shares worth more than $46 million.
At the end of the first quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $170 million in Brinker International, Inc. (NYSE:EAT), compared to 35 in the previous quarter worth $185 million.
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Disclosure. None. 10 Small-Cap Stocks to Sell Now Before Recession Begins is originally published on Insider Monkey.
