In this article, we will discuss the 15 Best Micro-Cap Stocks to Buy Now. You can skip our discussion of the merits of investing in micro-cap stocks and go directly to 5 Best Micro-Cap Stocks to Buy Now.
A micro-cap stock has a market capitalization between $50 million to $1 billion. Micro-cap stocks have higher risks amid low liquidity and lack of assets. Most of these stocks are early growth-stage companies that are more vulnerable to problems arising both internally and externally. They tend to burn through cash quickly, losing to their counterparts due to financial instability. Despite this, most investors include these stocks in their portfolio as they offer the potential for higher rewards.
Investing in micro-cap stocks during an economic recession can offer unlimited growth potential with long-term sustainability as these companies often focus on long-term projects. For instance, from January 2008 to January 2018, the Dow Jones Select Micro-Cap Index returned an annualized 11.6% while the S&P 500 returned an annualized 10.37%. The Russel 2000 micro-cap stocks index has recovered more than 8% since the start of January 2021, which outperformed the large-cap focused S&P 500 1% gain.
Micro-cap stocks often get no attention from the Wall Street, but data shows that these stocks often outperform mid-cap and large-cap stocks. Professors Thomas Cook and Michael Rozeff of the University of Iowa analyzed thousands of stocks trading on the NYSE, the AMEX and several other exchanges from 1968 to 1978. They ranked 3,130 stocks on the basis of market capitalization and divided them into several portfolios. The four portfolios containing micro-cap stocks posted returns of 0.14 to 0.45 percent after adjustment for risk, beating large-cap portfolios that posted negative monthly alphas ranging from -0.01 percent to -0.35 percent.
Centre for Research in Security Prices analyzed stocks data for a period of 80 years, from 1926 to 2009. Their research shows micro-cap stocks returned 12.1%, better than low-cap, mid-cap and large-cap stocks. Large-cap stocks posted 9.8% during this period. The “value effect” always helps micro-cap stocks. Investors try to gauge stocks on metrics like size, price-to-book value and assets. But growth cannot be evaluated with these metrics. That’s why micro-cap stocks are often mispriced.
In order to identify the 15 best micro-Cap stocks to buy now we started with the top stocks in the 30 most popular micro-cap stocks from 1999 to 2016. We were able to narrow down our list to 15 stocks using the hedge fund sentiment data.
Our in-house research showed that by using the hedge fund sentiment data, we can identify a small group of stocks that can outperform the S&P 500 index on average by double digits annually. For instance, the portfolio for stock picks for our monthly newsletter has beaten the market by over 111 percentage points since March 2017 (see details here). Some of the portfolio choices for our monthly newsletter were also publicly shared on our website. In October, we posted this real estate stock and since then it’s been up more than 60 percent. Between March 2017 and February 5th 2021 our monthly newsletter's stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points.
15 Best Micro-Cap Stocks to Buy Now
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Based on our hedge fund sentiment data, we present to you the 15 best micro-cap stocks to buy now. Please note that all market caps for the companies mentioned in the article are as of September 30, 2020.
We start the list of the 15 best micro-cap stocks to buy now with ARCH. At the end of September, a total of 26 hedge funds tracked by Insider Monkey were long this stock. An insider purchased 1,500 shares at around $46 in February 2021. The stock is up 4% since then.
At the end of September, a total of 26 hedge funds tracked by Insider Monkey were long this stock. Joseph Edelman’s Perceptive Advisors is one of the top hedge funds having positions in QTNT, which had $83 million invested in the stock at the end of September. An insider recently purchased 2,911,764 shares at around $4 in September 2020. The stock is up 25% since then. The company recently received a request from the Food and Drug Administration (FDA) for additional testing data regarding the 510 (k) application for the initial Serological Disease Screening Microarray (SDS) and MosaiQ instrument. QTNT will re-submit its application with additional data in early 2021 and expects to receive approval in mid-2021.
One of the biggest hedge funds having positions in CNST is Kurt Von Emster’s VenBio Select Advisor which had $40 million invested in the stock at the end of September. An insider recently purchased 62,500 shares at around $4 in December 2019. The stock is up 25% since then.
12. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST)
No of HFs: 26
Total Value of HF: $303 Million
At the end of September a total of 20 hedge funds tracked by Insider Monkey were long this stock. One of the biggest hedge funds having positions in CNST is Kurt Von Emster’s VenBio Select Advisor which had $86 million invested in the stock at the end of September. An insider recently purchased 5,539 shares at around $23 in March 2020. The stock is up 45% since then.
One of the biggest hedge funds having positions in FRTA is Jos Shaver’s Electron Capital Partners which had $55 million invested in the stock at the end of September. An insider recently purchased 23,585 shares at around $4 in March 2019. The stock is up 425% since then.
At the end of September, a total of 27 hedge funds tracked by Insider Monkey were long this stock. Cliff Asness’ AQR Capital Management is one of the top hedge funds having positions in the company, which had $37 million invested in the stock at the end of September. An insider recently purchased 10,000 shares at around $14 in February 2021. The stock is up 7% since then. Recently, Sally Beauty announced that they are launching PR initiatives for Black History Month. Aside from expanding their offerings for textured hair care, they will also reach out to consumers at home with textured hair educational content.
The 9th best micro-cap stock to buy now is FLDM. Derek C. Schrier’s Indaba Capital Management is one of the top hedge funds having positions in the stock, which had $29 million invested at the end of September. An insider purchased 10,000 shares at around $2 in March 2020. The stock is up 150% since then. During the fourth quarter of 2020, Fluidigm reported that its revenue jumped 38% year over year to $44.6 million.
One of the biggest hedge funds having stakes in the company is David Paradice’s Paradice Investment Management which had $39 million invested in the stock at the of September. An insider recently purchased 15,000 shares at around $10 in March 2020. The stock is up 150% since then. On February 11, ANF stock soared 3.77% to close at $25.61. ANF is one of the 15 best micro-cap stocks to buy now.
At the end of September, a total of 27 hedge funds tracked by Insider Monkey were long this stock. One of the biggest hedge funds having stakes in the company is Nehal Chopra’s Ratan Capital Group which had $28 million invested in the stock at the end of September. The company recently announced the pricing of initial public offering of 45,000,000 units at a price of $10 per unit.
MagnaChip is one of the 15 best micro-cap stocks to buy now. Howard Marks’ Oaktree Capital Management is one of the top hedge funds having positions in the stock, which had $40 million invested at the end of September. An insider purchased 5,000 shares at around $11 in August 2020. The stock is up 72% since then. MX manufactures analog and mixed-signal semiconductors as a platform solution in communications and IoT. Recently, MX launched a new brand identity.
