The market has been on a raging rebound since late March. A lot of stocks have seen tremendous returns, but it’s challenging to jump on a moving train.
But worry not, because there are some great stocks that have benefited from quarantine trends but are also rising on their own merits — well managed and well positioned in important sectors.
Part of the reason they’re attractive now is that big-cap stocks have received a lot of the attention, and these stocks still have a lot to offer. Remember, small-caps grow faster than larger-cap stocks when the economy is expanding because they’re more focused on their niches and it takes less water to raise their boats.
Here are 7 small-cap stocks you shouldn’t overlook:
- Clearfield (NASDAQ:CLFD)
- Camping World Holdings (NYSE:CWH)
- eGain Corp (NASDAQ:EGAN)
- Green Brick Partners (NASDAQ:GRBK)
- Goosehead Insurance (NASDAQ:GSHD)
- Superior Group of Companies (NASDAQ:SGC)
- Meridian Bioscience (NASDAQ:VIVO)
All of the stocks we’ll discuss today are A-rated stocks in my Portfolio Grader.
Focus can take you far. And it has for CLFD.
The company has been in the fiber optic cable management, protection and delivery products business for decades.
In the early 1990s, when there was a stampede toward fiber optic cables and the dawn of the internet age was upon us, CLFD was there. Then it survived the carnage when the bubble burst and there were scores of fiber optic systems looking for customers.
And now it’s back. Cloud storage is a huge market. 5G will be another big market; so too, will the Internet of Things (IoT). Remember, no matter how mobile a device may be, data has to be moved from physical servers to transmission towers and vice versa. Fiber optics are the way to do it.
But CLFD doesn’t compete by selling the cable, it sells all the equipment and devices — fiber panels, patch cards, wall boxes, etc. — to keep it secure and running.
The stock is up 60% year to date, yet its P/E ratio is below 50 and it still has plenty of growth ahead.
Camping World Holdings (CWH)
One of the toughest things during COVID-19, was deciding how to go on a summer vacation. Resorts and hotels seemed like dangerous petri dishes and air or train travel seemed just as risky.
That’s when the recreational vehicle (RV) craze hit. You could move your family around in your own moving hotel room and stay a safe distance from anyone while still getting away from you new home office.
And of course, RV stocks went wild.
CWH owns the Good Sam brand of RV retailers as well as many other complementary products and services, like insurance, roadside assistance, storage and financing.
The stock is up 120% year to date, but that’s not the impressive number. In the past 12 months, before the pandemic hit, the stock is up 268%. That indicates a real trend. And low interest rates will help continue this trend.
eGain Corp (EGAN)
There’s a lot that goes into good customer service these days. You all know what it’s like to get stuck in an automated maze of computer-generated voices shunting you one way and the next. There are even companies that utilize exhausting, convoluted help systems just so when you reach a real person, you’re willing to submit.
But there’s also a reaction against this kind of antagonistic customer service. And that is where EGAN comes in.
It has developed omnichannel platforms for a number of industries that make it easier for the customer and more efficient for the company to get the customer’s needs met. Using artificial intelligence, chatbots, social media and other avenues, EGAN is powering the customer service of some of the biggest companies in the world.
And the demand for smart customer service systems is only going to grow in a consumer-driven economy.
The stock is up 130% year to date and that cash infusion will certainly help power next-stage growth.
Green Brick Partners (GRBK)
Texas-based GRBK is a growing home developer in some of the hottest markets in the country.
It started in Dallas, then expanded to Atlanta. Now, it has properties in Colorado Springs and the Vero Beach area in Florida as well.
Generally, GRBK acquires property in a market and then works with local builders to build the houses, townhomes or communities. GRBK provides the underwriting and support for the builders as well as the buyers.
In some communities, it acquires an interest in the builder or will launch a building company with an experienced local management team.
Given record low interest rates, this is a good time to be in the building business, especially in high-growth areas.
The stock is up 63% year to date, yet it’s only trading at a PE of 11.
Goosehead Insurance (GSHD)
While the insurance industry has some of the most inventive commercials, its model has been the same since we were fighting the Cold War. Insurance agents represent a brand of insurance and sell you a package of comprehensive policies. Or, an independent agent provides a handful of options with the same goal.
GSHD has turned that model on its head by starting with providing the customer with the broadest amount of choice to build customized policies. That way, the customer can get the best rate among dozens of insurers.
And there are two channels. One is a company-owned channel where employees work for the company directly. The other is a franchise channel where someone will buy a franchise and operate under the Goosehead banner.
The plan is working. GSHD stock is up 144% year to date. It’s a bit expensive here, but should grow into its valuation.
Superior Group of Companies (SGC)
Launched a century ago, SGC may not be the first name you think of when you think of uniforms and corporate identity apparel for the healthcare, leisure and public safety sectors.
But it has been a solid performer with a steady and growing book of clients through the decades.
And now, some of its lines are in increasing demand, especially products for the healthcare sector. However, the most important aspect of the company is the fact that it has seen significant economic cycles in its time and it knows how to take advantage of the opportunities they present.
The company is also well known for it excellent customer service, which provides hidden value in a market like this.
The stock is up 87% year to date and still delivers a 1.6% dividend.
Meridian Bioscience (VIVO)
Bear in mind, the name of VIVO is Meridian Bioscience, not Biotech. This isn’t a drug company.
But that’s actually a good thing, because it doesn’t have all the regulatory hurdles drug makers have.
VIVO makes diagnostic equipment, test kits, antigens, reagents and the like. That’s a pretty good line of work during the onset of flu season, let alone amidst a pandemic.
The company has been around since 1976, which means it has a solid book of business that it can rely upon. It also has built a profitable business from these clients. Now that there’s increased demand for testing, this is a great growth opportunity for VIVO.
While the stock is up nearly 100% year to date, VIVO only has a P/E ratio of 19. Most of its competitors are double or triple that.