Facebook
Twitter
Small-cap stocks span a range of sectors from energy and technology to entertainment and financial services. But they are often considered a sector of their own. These stocks – generally defined as having a market cap of $2 billion or less – operate in a very different world than most large caps. Some are young and have strong growth prospects, others are local or niche businesses that are staying relatively small by circumstance or by deliberate choice.
But perhaps the most important quality shared by small-cap stocks is that they are commonly overlooked by investors. As we approach the final days of 2015, here are some great small-cap stocks to consider for 2016.
Callaway Golf (NYSE: ELY)
Callaway has been a leader in the sale of golf products and accessories for 23 years. It has had some ups and downs over that time but in recent years it has grown its revenues and returned to profitability.
Recent performance: Callaway stock is up more than 27% this year.
Reason to buy: Momentum looks good. In fact, this small-cap stock has grown more this year than in the previous five years.
Caveat: Callaway has a history of both growth and unsteady results. Investors should be ready for a ride.
Ciena Corp. (NYSE: CIEN)
With a market capitalization of almost $3 billion, this company is a shade larger than that of the typical small-cap stock. But as a company competing with many larger players making technology to support the delivery of voice and video data, it is very much a small player. And it’s doing pretty well, with strong sales growth and a return to profitability last year.
Recent performance: The stock is up about 5% this year, following some turbulence in past years.
Reason to buy: Momentum seems strong and if the company can compete effectively, it has plenty of room to grow.
Backstory: Earlier this year, the stock was up more than 33%. Some of its recent quarterly results have been inconsistent.
ExlService Holdings (NASDAQ: EXLS)
This 16-year-old company provides a variety of services such as claims processing, financial analytics and debt management under the broad “business solutions” umbrella. It had revenues last year of just under $500 million and is investing pretty aggressively to grow the business.
Recent performance: The stock has grown more than 57% this year and has more than doubled over the last five years.
Reason to buy: ExlService makes it easier for other companies to do business. Its model offers a combination of practical services and consulting, which leaves a lot of room for the company to grow.
Possible downside: No company stock can grow forever at the pace ExlService has enjoyed in recent years. Investors should manage expectations.
Hingham Institution for Savings (NASDAQ: HIFS)
I included this Massachusetts-based small-cap stock earlier this year in a piece about community banks that showed promise. This tiny bank was founded in the 1800s and has maintained its status as a true Main Street bank, operating just 11 branches, while also enjoying strong growth at those branches. Rather than growing by rapid expansion, it is focused on a small core operation and that focus has paid off.
Recent performance: The stock is up almost 50% this year and has almost tripled over the past three years.
Reason to buy: With a price-earnings ratio under 15, this stock could still be underpriced. It is most definitely under the radar of many investors.
Keep in mind: Community banks around the country are big acquisition targets. Hingham seems committed to remaining independent but it may consider the right offer.
New Relic (NYSE: NEWR)
This company, which went public late last year, makes a cloud-based suite of products that help businesses collect and analyze data in real time. Although it is still losing money, its revenues have more than tripled in two years.
Recent performance: This small-cap stock has risen about 6% so far this year.
Reasons to buy: In a word, cloud. This company helps businesses operates in the cloud, which is where more and more of the world’s business is headed.
Caveat: There’s no shortage of players competing for a share of the cloud business. There’s room for many, but not all of them, and competition will remain fierce.
This is being held from you
Believe it or not, some of the world’s top companies are being held off-limits from investors. These are companies that have handed wealthy insiders returns of 1,077%…1,941%…even 3,900%. We think this is grossly unfair…which is why we finally discovered a back-door way you can profit from this jealously-guarded market. Click here for details on this secret opportunity.