In this article, we will take a look at the 5 small-cap stocks with high potential. You can skip this part and go to 14 Small-Cap Stocks with High Potential.
5. Magnachip Semiconductor Corporation (NSYE:MX)
Number of hedge funds: 31
Magnachip Semiconductor Corporation (NSYE:MX) is one of the best small-cap stocks to buy with high potential. Magnachip Semiconductor Corporation (NSYE:MX) sells analog and mixed-signal semiconductor platform solutions in high-growth markets like IoT, automotive, consumer and industrial. Magnachip bulls believe Magnachip Semiconductor Corporation (NSYE:MX) has some strong growth catalysts. Its EPS estimate for 2022 was positive and analysts believe its EPS in 2023 will also remain in the green territory despite several headwinds. Magnachip Semiconductor Corporation (NSYE:MX)’s revenue took a hit in the second half of the year amid a slump in demand due to supply chain issues and lockdowns in China. With the Chinese economy turning back to normal, analysts believe the company could see normality in its operations.
During the third quarter, Magnachip Semiconductor Corporation (NSYE:MX)’s adjusted EPS came in at $0.02, beating estimates by $0.08. For the fourth quarter, Magnachip Semiconductor Corporation (NSYE:MX) said it expects revenue to come in between $57 million to $62 million, versus the consensus estimate of $78.77 million.
Here is what Altron Capital Management has to say about Magnachip Semiconductor Corporation (NYSE:MX) in its Q4 2021 investor letter:
“MagnaChip Semiconductor Corp. (NYSE:MX). While the previous buyout offer from Wise Road Capital did not go through as many expected, the company is still in talks with other potential buyers. Furthermore, the company announced a USD 75 million share buyback, which represents a significant percentage of the company’s shares. While we do not generally enter positions with the anticipation of a buyout, it is the case that a MagnaChip acquisition will be the most likely outcome.”
4. DiamondHead Holdings Corp. (NASDAQ:DHHC)
Number of hedge funds: 33
DiamondHead Holdings Corp. (NASDAQ:DHHC) is another SPAC in our list. DiamondHead Holdings Corp. (NASDAQ:DHHC) intends to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or related business combination with one or more businesses. A total of 33 hedge funds tracked by Insider Monkey had stakes in DiamondHead Holdings Corp. (NASDAQ:DHHC), compared to 34 funds in the previous quarter. Several major hedge funds have stakes in DiamondHead Holdings Corp. (NASDAQ:DHHC). These include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Robert Henry Lynch’s Aristeia Capital.
3. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
Number of hedge funds: 33
Texas-based Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) sells advertising services via billboards, kiosks, advertising services, electronic screens and wallscape displays. As of the end of the third quarter of 2022, 33 hedge funds tracked by Insider Monkey reported having stakes in Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), compared to 32 funds in the previous quarter. During the third quarter, Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)’s net loss came in at $38.8 million. Revenue in the quarter jumped 1.1% to reach $602.91 million, missing analyst estimates by $0.76 million. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)’s management said that Clear Channel’s business “remains healthy” as advertisers are continuing to tap the out of home market.
2. CONX Corp. (NASDAQ:CONX)
Number of hedge funds: 36
CONX Corp. (NASDAQ:CONX) is a SPAC focusing on effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar deals in technology, media, and telecommunications industries. It is one of the favorites of elite hedge funds. 36 funds in the database of Insider Monkey ended the third quarter with CONX Corp. (NASDAQ:CONX) in their portfolios, compared to 38 funds in the previous quarter. In October, the SPAC, headed by DISH Network (NASDAQ:DISH) Chairman Charles Ergen was reported to be in talks to buy DISH’s retail wireless unit, Boost Mobile.
1. Algoma Steel Group Inc. (NASDAQ:ASTL)
Number of hedge funds: 39
Algoma Steel Group Inc. is one of the most popular small-cap stocks among the 920 hedge funds tracked by Insider Monkey as of the end of the third quarter. Despite being a small company, 39 funds had stakes in Algoma Steel Group Inc. (NASDAQ:ASTL) at the end of the September quarter, compared to 45 funds in the previous quarter. Earlier this month, Algoma Steel Group Inc. (NASDAQ:ASTL) posted an update for the third quarter. Algoma Steel Group Inc. (NASDAQ:ASTL) said it expects its adjusted EBITDA loss in the period to come in between C$35 million to C$45 million. Algoma Steel Group Inc. (NASDAQ:ASTL) said that the sequential decrease in steel shipments was primarily due to lower than expected plate shipments, decline in steel prices and seasonable maintenance activities due to winter.
Here is what Nordstern Capital has to say about Algoma Steel Group Inc. (NASDAQ:ASTL) in its Q3 2022 investor letter:
“The world is short on raw materials and energy. Nordstern Capital has increased its exposure to raw materials and energy. Recession fears may temporarily suppress demand and prices. The fundamental issue, however, is a sustainable lack of supply, caused by decade-long underinvestment. The shortages cannot be resolved in the short to medium term.
Currently suppressed stock prices offer a wonderful opportunity for our commodity businesses to buy back their own shares. For instance, Algoma Steel Group (NASDAQ:ASTL) reduced its diluted share count this year from 177 million to 111 million. Nonetheless, ASTL’s share price has come down 50%, because US HRC steel prices per ton declined in the past year from $2,000 to currently $713. Today, ASTL has $500m in net cash and a market capitalization of about $700m. The company is profitable even in the current recessionary environment. The CFO expects annual mid-cycle free cash flow generation greater than the current ASTL enterprise value. This is one illustrative example. ASTL is not alone. Many present-day commodity businesses are cash and earnings rich and can use weak stock prices for aggressive buybacks.”
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