Small-Cap Stocks on Sale and Looking for Buyers
The broader market correction hasn't ignored small company stocks. But there is a silver lining.
The impact of the current broad market correction is quite evident in this issue of the SmallCap Informer. As of April 22, 2022, the S&P SmallCap 600 index is firmly in correction territory, down more than 13% from its all-time high in November 2021.
Within the SmallCap Informer, 40 of 50 stocks included in our last issue saw prices decline from March 28, 2022, to April 22, 2022, the data date of this issue (May 2022).
While it can be uncomfortable to see a portfolio value fluctuate widely, it is also common for stock prices to rise and fall throughout a year. Corrections are normal, and investors in the accumulation phase of their investing careers should welcome the opportunity to load up on quality companies at reasonable prices that comes with market declines.
Investors looking for small company opportunities will find no shortage in the current SmallCap Informer. 36 of 50 covered companies are presently in the buy zone. These stocks have upside/downside ratios of 3:1 or higher and a projected total return of at least 15.0% a year from current prices. Many companies are suffering from severe lack of investor interest, manifested in single digit P/E ratios—despite having positive long-term and even acceptable (in our view) short-term outlooks.
Yes, the market could further descend into bear market territory, but history shows that:
- The market always recovers from bears and corrections, and
- It is impossible to always invest at the absolute market bottom. It is best not wait if you have capital to deploy and patience on your side.
The first recommended stock in the May 2022 issue of the SmallCap Informer is a second look at a growing business that specializes in industrial and workplace safety products, certainly an area of increasing importance. Our second stock is a defensive play that operates in a fragmented segment of the healthcare industry.
- DOUGLAS GERLACH
Reprinted from the May 2022 issue of the SmallCap Informer.
Not a subscriber? Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the 50 high-quality small company stocks covered in the newsletter.