There’s a small portion of my portfolio I allocate toward companies I’d put in the “higher risk” bucket. For me, that means small caps and companies that trade either under the radar (on the pink sheets) or are generally overlooked by analysts. In many cases, these companies trade under $10 per share. So, for investors looking to own whole shares of stock, and who may be on a tight or fixed budget in terms of what they can allocate to the market on a monthly or annual basis, such companies may be worth considering for those looking for some speculative upside in their portfolios in a bid to beat the market.
Of course, the vast majority of my portfolio (and most invsetors’ for that matter) is in broadly diversified index funds, and that’s the way it probably should be. That said, investing should be fun (at least educational), and picking stocks is something I’ll probably never stop doing.
With that said, here are three small cap stocks I’m watching closely right now, and either considering buying (or already have).
The Metals Company
Vancouver-based The Metals Company (NASDAQ:TMC) continues to be one of the most compelling small cap stocks in any market, at least in my view. The deep sea mining company has developed a unique technology, to be able to pick up golf ball-sized nodules off the ocean floor and bring them to the surface. These nodules contain various critical minerals used for battery and energy storage technologies, including nickel, cobalt, manganese and copper. So, for those bullish on the electrification trends we’re seeing underway, TMC is a sneaky way to play this trade, in my view.
The company has received permits to explore the ocean floor in certain locales, and is awaiting confirmation the company will be able to mine for its critical minerals using the U.S. flag. As the earliest mover in this space, there’s clearly the most potential upside with investing in a company like TMC. However, given the nascent nature of this business (and this industry overall), there is significant risk involved here.
Accordingly, while the Trump administration and other governments around the world look to deep sea mining to partly replace (or at least compliment) above-ground mining activities, this is a stock I think could be vastly undervalued relative to its future potential. Valued at a market cap of just $3.9 billion, this is one of those under-the-radar small cap stocks I think may be worth a gamble here.
Puma Biotechnology
One of the more compelling small cap picks I’ve come across of late is Puma Biotechnology (NASDAQ:PBYI), a stock that’s absolutely exploded higher of late. Trading at just $5 per share (and 5-times earnings, for that matter), Puma’s core biopharmaceutical portfolio is one of the most undervalued in this space, at least in my view.
The company’s key drug is Nerlynx, a cancer drug which has seen solid commercial traction in most of the company’s key markets. Investors have continued to put capital to work in this name over the course of the past year, with PBYI stock actually increasing nearly 90% over this time frame.
In other words, investors have a company trading at the $5 level which has strong momentum (and is cheap relative to its earnings). That’s hard to find in the pharma space, which tends to be riddled with unprofitable or extremely overvalued stocks. This is one of the more intriguing drug stocks I think is worth a look, and would encourage investors to take a deeper look at this name.
WM Technology (MAPS)
Perhaps the most speculative pick on this list, WM Technology (NASDAQ:MAPS) is an online cannabis marketplace provider, looking to blend the growth potential of both the e-commerce world and the cannabis sector.
Thus far, the company has seen some traction, with roughly $183 million in revenue over the past year. Trading a bit above a $200 million market cap, this is a company that’s valued at roughly 1-times sales. So, for those bullish on the cannabis sector, there’s a lot to like about where the company is positioned for future growth.
It’s worth pointing out that since the company’s IPO, WM Technology is actually down around 90%. Accordingly, the 12 month move in this stock (up around 30%) needs to be kept in context.
Again, this is a highly speculative name. But after the beat down WM Technology has seen in recent years, and hints that a more favorable regulatory environment for cannabis companies may be ahead, there’s a lot to like about this company’s risk/reward upside presently.
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