While you can sugarcoat extreme speculation in the market with the label best micro-cap stocks to buy, you may want to keep these ideas to yourself. If you share them with your financial advisor, that person will likely have a meltdown. Personally, I want to keep my tally of angry emails in my inbox to a minimum.
That said, the best micro-cap stocks doesn’t exclusively center on wild speculation. To be sure, this arena presents extraordinary risks. However, when you filter out the enterprises that enjoy Wall Street analyst backing, you might find a diamond in the rough.
Combine that with possibly favorable dynamics in the options market – please refer to this article for a basic breakdown of terminology and concepts – and you might have a winner on your hands. If you have nerves of steel, below are the best micro-cap stocks to buy now.
A gaming accessory manufacturer, Turtle Beach (NASDAQ:HEAR) is perhaps best known for its gaming-centric headsets. One of the more popular ideas among the best micro-cap stocks, Turtle Beach tips the scale in terms of market capitalization at just under $179 million. Since the start of the year, HEAR stock gained over 40% of equity value. On Thursday, shares closed at $10.34.
Turning to the options arena, HEAR’s volatility smile – or the implied volatility plotted at various strike prices – presents an intriguing backdrop. At the $11 strike, IV sits at a low of 0.48. Moving in the far out-the-money (OTM) direction (i.e. to the right), IV rises to a high of 2.48 at the $22 strike. This framework suggests recognition of HEAR’s robust upside potential. On the flipside, IV spikes to 4.01 at the $1 strike. As the pricing moves deeper in the money (ITM), volatility generally rises, indicating risk mitigation.
Compellingly, though, analysts peg HEAR as a unanimous strong buy with a $15.25 price target, imlying over 47% growth.
PHX Minerals (PHX)
Large tanker ship carrying natural gas at dusk in harbor
Source: shutterstock.com/Wojciech Wrzesien
Based in Oklahoma City, Oklahoma, PHX Minerals (NYSE:PHX) focuses on the acquisition, management and monetization of oil and natural gas mineral properties. Per its website, the company owns approximately 75,000 leased mineral acres principally located in Oklahoma, Texas, Louisiana, North Dakota, and Arkansas. Since the start of the year, PHX ended exactly at parity at $3.72.
Although a hardly inspiring performance, PHX may be one of the best micro-cap stocks to buy. Looking at its volatility smile, the underlying IV sits at a low of 0.90 at the $5 strike price. Moving to the far OTM direction (right), IV clocks in at 3.20 at the $7.50 strike. On the opposite end, IV rises to only 1.85 at $2.50.
To be fair, the limited derivatives market makes assessing trader sentiment difficult. Still, it’s worth pointing that IV may be tilting toward anticipation of a large bullish move. Adding fuel to the fire, analysts peg PHX a unanimous strong buy. Their average price target lands at $5.50, implying nearly 48% upside potential.
Intellicheck (IDN)
A tablet displaying the word "Verification"
Source: one photo / Shutterstock
Headquartered in Jericho, New York, Intellicheck (NASDAQ:IDN) provides identity authentication and verification solutions. Specifically, Intellicheck distinguishes itself through real-time authentication of documents such as driver’s licenses. Per its website, it features several prominent enterprise-level clients. Not surprisingly, IDN gained slightly over 21% since the January opener, recently closing at $2.53.
Even with the solid performance, IDN still ranks as one of the best micro-cap stocks to buy now. Turning to its volatility smile, IV sits at a low of 0.56 at the $2 strike price, near the $2.53 close. Moving in the far OTM direction, IV peaks at a value of 4.21 at the $5 strike. It’s possible that traders anticipate optimism in the coming months ahead.
At the same time, the smart money is being, well, smart about it. IV in the deep ITM direction spikes to 3.83 at the $1 strike. This backdrop implies recognition of a tail risk (i.e. black swan event). Nevertheless, analysts also peg IDN as a unanimous strong buy. Their average price target hits $4.67, implying almost 85% upside potential.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
