What Are the Best Small-Cap Stocks to Buy Now for the Long Term?
By Mohit Oberoi, CFAJul. 23 2021, Published 8:49 a.m. ET
Small-cap companies are stocks with market capitalization between $300 million to $2 billion. While small-cap stocks tend to be more volatile compared to their large-cap peers, some of them can also be a multibagger. Some of the current large-cap companies were once small-cap companies. What are the best small-cap stocks to buy now and hold for the long term?
Small-cap stocks are riskier investments than large-cap companies. Also, it's easier to influence their price action compared to large-cap companies. Reddit traders also have a flair for small-cap stocks. GameStop and AMC Entertainment were both small-cap companies before WallStreetBets traders triggered a short squeeze.
Best small-cap stocks to buy now
The following small-cap stocks are good buys right now:
- Zomedica
- Senseonics
- Aurora Cannabis
- Ashford Hospitality
Zomedica (ZOM) is an animal diagnostic company that's working to commercialize its Truforma product. If the product gets commercialized successfully, Zomedica could be a multibagger given the massive market opportunity. ZOM stock is now down 78 percent from its 52-week highs and looks like a good small-cap to buy now. The stock’s market cap is just over $600 million.
Senseonics looks like a good small-cap stock to buy.
Senseonics is into the diabetic care market and produces the Eversense CGM (continuous glucose monitoring). The system has three components—the sensor, transmitter, and mobile app. The user can track events like meals and workouts on the app and share them with up to five people.
The CGM product looks exciting and successful commercialization could take SENS stock much higher. EmblemHealth, which is among the largest non-profit health plans in the U.S., has provided positive coverage for the product. SENS was also added to the Russell 3000 Index in June.
Aurora Cannabis looks like a good small-cap marijuana stock.
Marijuana stocks have come off their 2021 highs. Aurora Cannabis (ACB) stock is down 62 percent from its 52-week highs and now has a market cap of just under $1.5 billion. The stock’s long-term outlook looks positive as federal legalization of marijuana should eventually happen in the U.S. ACB trades at an NTM EV-to-EBITDA multiple of around 7x, which looks reasonable.
Ashford Hospitality looks like a good reopening play.
Ashford Hospitality (AHT) is another small-cap stock worth looking at now. The stock has fallen sharply from the peaks and also recently went for a reverse stock split. While the reverse split helped it escape the penny stock category, it's still a small-cap with a market cap of just under $500 million.
AHT is a REIT and invests in upscale hotel properties and looks like a good play on the reopening story. The stock has fallen hard over the last month due to the reverse stock split, stock issuance, and tepid results. However, if you're willing to take a long-term view of the travel and tourism industry, AHT looks like a good buy.
Reddit small-cap stocks
Both SENS and ZOM were once popular on Reddit group WallStreetBets. Clean Energy (CLNE) is one Reddit small-cap stock worth buying. The company has a market cap of just around $1.5 billion is a good play on the green energy theme. As I noted previously, CLNE along with Cleveland-Cliffs are two fundamentally strong Reddit stocks.
