Small-cap stocks have been struggling compared to large-cap stocks, with large-cap stocks outperforming small-caps for eight of the past ten years. While large-cap stocks are typically more stable and international, small-caps are often more innovative and less covered by Wall Street, giving individual investors a chance to find hidden gems. Despite the recent underperformance of small-cap stocks, there are still opportunities to be found in this sector.
Dorian LPG Ltd. is a small-cap stock that owns a fleet of ocean tankers for transporting liquefied petroleum gas internationally. With a strong profit margin and attractive valuation, this stock is worth considering for investors. Photronics Inc., a company that produces photomasks for integrated circuits and flat-panel displays, also looks appealing despite limited analyst coverage. With consistent earnings growth and a low valuation, this stock presents an opportunity for investors.
International Money Express Inc. is another small-cap stock worth considering, as it helps Latin American workers in the U.S. send money home. Despite concerns about potential policy changes impacting Latin American immigration, the company has shown strong earnings growth. Quanex Building Products Corp., a company based in Houston, Texas, that manufactures building products, also shows potential for investors. While analysts have a more cautious outlook, there may be opportunities for growth in the future.
John B. Sanfilippo & Son Inc., a company that processes and sells nuts, is another small-cap stock that has shown consistent earnings growth over the years. Despite being largely ignored by Wall Street, this company has a strong track record of profitability. Overall, there are opportunities for investors in the small-cap sector, despite the recent underperformance compared to large-cap stocks.
In the past, the author has recommended several small-cap stocks, with an average one-year return of 16.2%. This outperforms the returns of both the S&P 500 Total Return Index and the Russell 2000 Index. While past performance is not indicative of future results, the author’s track record in picking small-cap stocks is worth noting. Additionally, the author discloses personal ownership of International Money Express and John B. Sanfilippo, as well as ownership in a hedge fund of Warrior Met Coal.
