Investing in micro-cap stocks can be a great way to diversify your portfolio and to potentially generate superior returns to those of more traditional investments. Micro-cap stocks are defined as stocks with a market capitalization between $50 million and $300 million. These stocks are seen as being more risky than other stocks, but they also offer the potential for greater returns.
Micro-cap stocks typically require active management because they are more volatile and illiquid than larger stocks. BofA's head of small and mid-cap strategy, Jill Carey Hall, thinks that 2023 is going to be "a year that's more about picking your spots, active management over passive" and is also more bullish on small-caps as compared to large-caps and mega-caps.
Before investing in micro-cap stocks, it is important to do your research. These stocks can be volatile and often lack the liquidity of larger stocks. It is important to understand the company, its growth story, and its financials before investing. Additionally, investors should consider the company’s market position, size, and competition. This can provide insights into the company’s potential for future growth and help determine whether it could be a potentially successful investment.
When investing in micro-cap stocks, it is important to understand the differences between them and their larger counterparts. Micro-cap stocks, as mentioned above, are often more difficult to offload and can be subject to huge price swings. Moreover, these stocks are often less likely to be covered by analysts, which can make it difficult to assess their true value.
Some of hedge funds' top micro-cap stock picks include Industrial Logistics Properties Trust (NASDAQ:ILPT), CVRx, Inc. (NASDAQ:CVRX), and BlackSky Technology Inc. (NYSE:BKSY). Let's now look at these stocks, among others, in detail.
Our Methodology
To determine the best high growth micro-cap stocks to buy according to hedge funds, we screened for companies that had a market cap in the range $50 million and $300 million. We added additional filters for revenue growth to concentrate our search results. We screened for micro-cap stocks that had a quarterly year over year revenue growth rate of at least 50%. Finally, we consulted Insider Monkey's database to narrow down our selection to micro-cap stocks that were the most widely held by institutional investors. We have ranked these stocks in ascending order of their quarterly revenue growth, measured on a year-over-year basis.
Quarterly Revenue Growth YoY as of September 30, 2022: 52.20%
Number of Hedge Fund Holders: 24
American Public Education, Inc. (NASDAQ:APEI) is an American education services company that provides online and on-campus education services. The company has three divisions: American Public University System, Rasmussen University, and Hondros College of Nursing. As of February 23, American Public Education, Inc. (NASDAQ:APEI) has gained 10.47% over the past 6 months.
American Public Education, Inc. (NASDAQ:APEI) grew its revenue by 52.20%, year over year, during the fiscal third quarter of 2022. The company's revenue for the quarter amounted to $149.54 million and outperformed Wall Street consensus by $2.92 million. American Public Education, Inc. (NASDAQ:APEI) is one of the top high growth micro-cap stock picks of hedge funds.
At the end of Q4 2022, 24 hedge funds were bullish on American Public Education, Inc. (NASDAQ:APEI) and disclosed positions worth $76.4 million in the company. This is compared to 17 hedge funds in the preceding quarter with stakes worth $56.2 million. The hedge fund sentiment for the stock is positive.
As of December 31, Redwood Capital Management is the largest shareholder in American Public Education, Inc. (NASDAQ:APEI) and has a position worth $22.7 million in the company.
Some of the top high growth micro-cap stocks that are popular among institutional investors include American Public Education, Inc. (NASDAQ:APEI), Industrial Logistics Properties Trust (NASDAQ:ILPT), CVRx, Inc. (NASDAQ:CVRX), and BlackSky Technology Inc. (NYSE:BKSY).
Quarterly Revenue Growth YoY as of September 30, 2022: 52.48%
Number of Hedge Fund Holders: 8
Landsea Homes Corporation (NASDAQ:LSEA) is an American homebuilding company. The company designs, constructs, and sells suburban and urban single-family homes in the United States. At the close of Q4 2022, 8 hedge funds were bullish on Landsea Homes Corporation (NASDAQ:LSEA) and disclosed positions worth $3.6 million in the company.
For the fiscal third quarter of 2022, Landsea Homes Corporation (NASDAQ:LSEA) generated a revenue of $326.50 million, up 52.48% year over year. The company reported an EPS of $0.69 and beat EPS estimates by $0.17. Landsea Homes Corporation (NASDAQ:LSEA) is ranked among the best high growth micro-cap stocks to buy now, according to hedge funds.
As of February 23, Landsea Homes Corporation (NASDAQ:LSEA) has gained 16.43% year to date and is trading at a PE multiple of 3x.
Quarterly Revenue Growth YoY as of September 30, 2022: 52.63%
Number of Hedge Fund Holders: 7
Consolidated Water Co. Ltd. (NASDAQ:CWCO) operates as a water utility company in the Cayman Islands, the Bahamas, and the United States. The company has four business segments: Retail, Bulk, Services, and Manufacturing. As of December 31, Ken Griffin's Citadel Investment Group is the top investor in Consolidated Water Co. Ltd. (NASDAQ:CWCO) and has disclosed a position worth $735.3 million in the company.
For the fiscal third quarter of 2022, Consolidated Water Co. Ltd. (NASDAQ:CWCO) generated a revenue of $25.05 million and outperformed market consensus by $0.95 million. The company's revenue for the quarter grew by 52.63% on a year-over-year basis. As of February 23, the stock has returned 64.70% to investors over the past 12 months.
At the end of Q4 2022, 7 hedge funds held stakes in Consolidated Water Co. Ltd. (NASDAQ:CWCO). The total value of these stakes amounted to $9.35 million. Consolidated Water Co. Ltd. (NASDAQ:CWCO) is one of the best high growth micro-cap stocks to buy now according to hedge funds.
Quarterly Revenue Growth YoY as of December 31, 2022: 59.23%
Number of Hedge Fund Holders: 5
California BanCorp (NASDAQ:CALB) is the holding company for California Bank of Commerce. The company provides commercial banking services in California. As of February 23, California BanCorp (NASDAQ:CALB) has gained 23.05% over the past 6 months and is trading at a PE multiple of 10x.
On January 26, California BanCorp (NASDAQ:CALB) posted strong earnings for the fiscal fourth quarter of 2022. The company reported an EPS of $0.91 and beat EPS estimates by $0.17. The company's revenue for the quarter amounted to $23.82 million, up 59.23% year over year and ahead of Wall Street expectations by $2.70 million. California BanCorp (NASDAQ:CALB) is one of the best high growth micro-cap stocks to buy now according to hedge funds.
At the close of the fourth quarter of 2022, California BanCorp (NASDAQ:CALB) was a part of 5 investors' portfolios that disclosed collective positions worth $12.2 million in the company. This is compared to 5 hedge funds in the third quarter of 2022 with stakes worth $8.1 million.
As of December 31, Fourthstone LLC is the top shareholder in California BanCorp (NASDAQ:CALB) and has a position worth $6 million in the company.
Quarterly Revenue Growth YoY as of September 30, 2022: 64.18%
Number of Hedge Fund Holders: 7
Veritone, Inc. (NASDAQ:VERI) is an American software company that specializes in artificial intelligence software solutions. The company has operations in the United States and the United Kingdom. As of February 23, Veritone, Inc. (NASDAQ:VERI) has gained 43.79% year to date.
Veritone, Inc. (NASDAQ:VERI) generated a revenue of $37.20 million during the fiscal third quarter of 2022, up 64.18% year over year and ahead of Wall Street estimates by $2.71 million. Veritone, Inc. (NASDAQ:VERI) is one of the best high growth micro-cap stocks to buy now according to hedge funds.
At the end of Q4 2022, Veritone, Inc. (NASDAQ:VERI) was spotted on 8 investors' portfolios that disclosed collective stakes worth $8 million in the company. This is compared to 6 positions in the previous quarter with stakes worth $3.5 million. The hedge fund sentiment for the stock is positive.
As of December 31, D E Shaw is the largest shareholder in Veritone, Inc. (NASDAQ:VERI) and has a position worth $2.3 million in the company.
In addition to Veritone, Inc. (NASDAQ:VERI), some other micro-cap stocks that have consistently grown their revenue over their past four fiscal quarters include Industrial Logistics Properties Trust (NASDAQ:ILPT), CVRx, Inc. (NASDAQ:CVRX), and BlackSky Technology Inc. (NYSE:BKSY).
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Disclosure: None. 10 High Growth Micro-Cap Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
