11 Small Stocks Are Ready For Big-Time Jumps Of 50%+, Analysts Say

Small-company stocks are showing big potential again versus the S&P 500. And analysts are pinpointing the ones they think can still move 50% or more higher from here.

Eleven stocks in the S&P SmallCap 600, including consumer discretionary Haverty Furniture (HVT), technology play Unisys (UIS) and health care Organogenesis (ORGO), are all topping the index’ 22.9% rise this year so far. But more importantly, analysts think these small cap plays can still jump 50% or more.

The big shift in small caps showed up on Friday. The SPDR S&P 600 Small Cap ETF (SLY) jumped nearly 3%, easily topping the 0.9% gain by big-cap benchmark SPDR S&P 500 ETF (SPY). It was a start of a reversal small-cap investors have been waiting for.

Seeing small caps perk up is an important shift in the market. It’s been the leading force in the market’s run since last year. But small stocks largely lost steam in 2021 so far. “It’s been quite a wild ride for small caps,” says Bespoke Investment Group.

Small-Caps Coming Alive Again Vs. S&P 500

What’s up with small caps?

The SPDR S&P 600 Small Cap lost much of its mojo this year versus the big-cap benchmark SPDR S&P 500 ETF. Small stocks are down nearly 3% from their high this year on June 8. That’s underperforming the S&P 500’s 6.6% run during that time. Big caps and the S&P 500 notched 52 record closes in 2021 so far, says Dow Jones.

And seeing small caps slip is unusual amid this bull market.  The SPDR S&P 600 Small Cap ETF is leading the S&P 500 by a mile over the past year. Small caps are up nearly 52% in a year’s time. The S&P 500 in that time is up only about half that much, or 29.2%, largely due to a handful of stocks.

But analysts are seeing some bright spots in the small cap universe.

Looking For Analysts’ Small Cap Favorites

Many of analysts’ top picks for the biggest small cap gains also carry solid ratings. All three of their S&P 600 stocks topping the market analysts see the most upside in all carry IBD Composite Ratings of 80 or higher.

Take Haverty Furniture. The small $675 million-in-market-value company sells furniture in the U.S.. The stock is already up an impressive 33.4% this year. But it’s been hit harder than most from the small cap index’ peak in June. It’s down nearly 29% in that time, despite reporting a 51% better-than-expected quarterly profit of $1.16 a share on July 27. And yet, analysts think this tiny stock still has room to rise more than 70% in 12 months.

Within small technology companies, Unisys stands apart in analysts’ minds. The $1.6 billion in market cap company still has 73% higher to go until hitting analysts’ 12-month price target. Keep in mind, the company’s still is still up 23.5% this year, despite falling nearly 14% from the June 8 high for the S&P 600.

Health care, too, is a spot analysts see small-cap promise. Consider the $2 billion market value company making wound coverings for athletes: Organogenesis. The stock is up a powerful 112% this year. In fact, while many small-caps are down since early June, Organogenesis is up 3.3% since then. But analysts still think this small cap with a Composite Rating of 90 can rise another 67% in 12 months.

Bank of America, though, cautions from going overboard in small companies, especially in health care. “Health Care has the largest weight in the risk factors we track,” the bank said in a report.

But The Future Looks Good For Small, Beyond S&P 500

Small Cap stocks, based on their average price change in the past 50 days, are stuck in a tight trading range, Bespoke says. And when that happens, small caps tend to do well in the next one, three and six months.

Small caps only moved 2.4% from the 50-day high to low, the narrowest range since November 2019 and a somewhat rare occurrence historically, Bespoke found. And good things usually happen shortly after.

“Three months later, the Russell 2000 (small cap index) was higher all six times for an average gain of 6.7%, which is more than twice the historical average for all periods since 1979,” Bespoke found. “Six months later, the Russell was higher in all but one period for an average gain of 10.4% (median: +12.9%) which is nearly twice the historical average.”

But all small cap investors know to expect volatility. “One year later, (the Russell) was also higher five out of six times, but both the average (9.6%) and median (7.3%) returns were below the historical average,” Bespoke said. But analysts picked their spots to be.

Market Topping Small Caps Analysts Like Most

All beating the S&P SmallCap 600 index this year so far

Company Ticker Stock YTD % ch. Sector Implied upside* Composite Rating
Haverty Furniture (HVT) 33.4% Consumer Discretionary 73.3% 81
Unisys (UIS) 23.5% Information Technology 72.8% 81
Organogenesis Holdings (ORGO) 111.7% Health Care 67.8% 90
Unifi (UFI) 27.5% Consumer Discretionary 62.1% 63
Ultra Clean Holdings (UCTT) 48.1% Information Technology 56.1% 81
Penn Virginia (PVAC) 108.3% Energy 54.9% 71
Titan International (TWI) 73.5% Industrials 54.2% 64
Laredo Petroleum (LPI) 166.4% Energy 53.9% 64
Ichor Holdings (ICHR) 45.3% Information Technology 52.5% 62
Bonanza Creek Energy (BCEI) 106.6% Energy 51.1% 79
Talos Energy (TALO) 50.7% Energy 50.7% 52
Sources: IBD, S&P Global Market Intelligence, * – based on analysts’ 12-month price targets on S&P SmallCap 600
Follow Matt Krantz on Twitter @mattkrantz

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