Best Small Cap Stocks to Buy Now
One of the best parts of investing is finding the hidden gems that have massive potential. These types of opportunities are often found in small cap stocks that have yet to be discovered. In this article, I’m going to cover my best small cap stocks to buy going into 2022.
Small cap stocks are companies with a market cap between $300 million – $2 billion. Furthermore, these assets are typically more volatile than larger, more established businesses.
While that may be true, you also have the chance to get in on the ground floor of high-growth opportunities.
Let’s take a look at the best small cap stocks to buy for next year.
The 5 Best Small Cap Stocks to Buy Now
All of your favorite brands started somewhere, most as small cap stocks. Consumer favorites like Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Tesla (NASDAQ: TSLA) all started as small companies and grew their way to the top.
With that being said, these are some of the best small cap stocks to buy as they are fighting to grow their name and deliver on results.
#5 Purple Innovation (NASDAQ: PRPL)
- Market Cap: 1.32B
- EPS: -2.56
- YOY Revenue Growth: 10.6%
First on our list of the best small caps to buy is Purple. Many people know Purple Innovations from the commercials promoting superior mattress comfort & technology. The company offers premium comfort products such as:
- And sheets
However, Purple is not immune to supply chain issues, which limited its ability to meet demand in Q2. With that being said, the company still increased its wholesale unit by 233% YOY as retail stores are opening back up.
Joe Megibow, CEO, said we are “progressing towards our long term targets of $2 billion to $2.5 billion in annual net revenue… over the next three to five years.”
However, Purple’s biggest threat is the competition creeping into the market. For example, companies like Casper Sleep (NYSE: CSPR) and Sleep Number (SNBR) have comparable products. Not to mention large retailers like Walmart and Amazon offer discounted alternatives.
With Purple’s stock down 52% from its yearly high, will the company overcome the competition? If consumers catch onto the superior technology, Purple has a big market ahead. But, if competitors take a larger market share, it could spell more trouble for PRPL stock.
#4 Tupperware Brands (NYSE: TUP)
- Market Cap: 1.11B
- EPS: 2.53
- YOY Revenue Growth: 17%
For all you value investors out there, here’s a company for you. Everyone’s favorite kitchen storage solutions maker is also one of the best small cap stocks to buy now.
Tupperware is amid a “business turnaround,” investing in new strategies and talent across the board. In fact, the plan is starting to pay off as sales are growing and the company is paying off its debt.
The company posted second-quarter sales of $464.7 million, with net income reaching $35.6 million.
Tupperware stock is down 40% since the beginning of the year. But, if you zoom out, it’s down over 76% from its all-time high set in 2013.
If management can successfully turn the company around, Tupperware stock has a chance to rebound.
#3 Carparts.com (NASDAQ: PRTS)
- Market Cap: 780M
- EPS: -0.06
- YOY Revenue Growth: 32%
Carparts.com’s business is fairly self-explanatory –they sell car parts through its digital platform. The supplier was established in 1995 and has grown into a leader in its industry.
Despite the limitations in the industry’s supply chain, the company is thriving and shattering sales records. Carparts.com reported YOY revenue growth for the sixth consecutive quarter in its Q2 earnings. In addition, it earned $2.1 million in net profits.
Not only that, but Carparts.com is expanding its capacity, allowing for more inventory. The growth is a good sign for the company as it navigates uncharted territory.
On top of this, Carparts.com was just added to the Russell 2000 in 2020 as the company continues to improve.
A major advantage could be coming for the supplier as the FTC is looking into dishonest practices by manufacturers. The agency claims repairs may be limiting and impacting consumer rights. If they find this to be true, Carparts.com could see a big boost.
As a result of the growth, Carparts.com stock is up over 900% in the past two years. But, as the company continues expanding, it’s focused on delivering results to shareholders.
#2 AppHarvest (NASDAQ: APPH)
- Market Cap: 524M
- EPS: -1.97
- YOY Revenue Growth: N/A
Next on our list of best small cap stocks to buy – a newer company, AppHarvest, was started in 2017. The high-tech farming startup is helping solve one of the world’s biggest problems – sustainable food.
AppHarvest first started planting just over a year ago in October 2020 and is focusing on the future of farming. Particularly, the company is building high-tech greenhouses to meet the increasing demand for U.S farmed crops.
The company has 17K – 20K acres of potential. Additionally, AppHarvest has distribution deals that provide produce for big retailers like Walmart, Target, and Kroger. On top of that, 70% of the U.S population is within a day of transport with the company’s convenient Appalachia location.
As the pandemic has shown us, the food industry is vulnerable, and AppHarvest is improving that.
Although the company just went public in February, AppHarvest stock is down nearly 90% from its highs earlier this year. The price drop could offer investors a chance to get in a beaten-down stock, right as the company is starting to expand.
Keep reading to discover the #1 best small cap stock to watch for in 2022.
#1 Camtek (NASDAQ: CAMT) – Best Small Cap Stocks to Buy
- Market Cap: 1.72B
- EPS: 1.00
- YOY Revenue Growth: 82%
Camtek is an Israel-based developer of high-end inspection equipment for software. The tools are used to support the semiconductor industry. Additionally, the company offers its solutions to consumers all over the world.
The pandemic created a massive surge in demand for computer chips. As a result, Camtek is now expanding its capabilities to meet the rise in demand.
What’s more, the solution provider is expecting the growth to continue. Management noted in its second-quarter results it expects Q3 revenue between $69-$71 million. And if that’s the case, it would achieve 80% YOY growth for the last nine months.
With a healthy backlog and growing demand for its services, Camtek is in an excellent position to continue its expansion.
Camtek stock is up nearly 115% in the past year as demand for chips continues to mount. If it can keep delivering as it has been, investors should continue seeing the rewards.
Best Small Cap Stocks to Buy – Is It Time to Invest?
Now that you know the best small cap stocks to watch going into 2022, is it time to invest in them?
Over the past year, small cap stocks have been some of the best-performing assets in the stock market. In fact, the Russell 2000 index is outperforming the S&P 500 by 17% in the past year.
Despite these companies’ small market caps, they have massive potential. Most importantly, investors will continue pouring in, pushing prices higher if they can continue producing results.
All things considered, even if these are the best small cap stocks to watch, they still have risks. Many smaller companies have less funding to work with, and as a result, need to continue executing. Invest in small caps with caution as they can be more volatile when compared to larger, more established companies.
Whether it’s the best small cap stocks to buy or another promising investment, Trade of the Day has you covered. Sign up for this free e-letter today and start making better, more profitable investment decisions.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.