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2022 has been a rough year for the equities market amidst higher interest and inflation rates and geopolitical risks. These factors are likely to continue throughout the year. So why should you invest in small-cap stocks to buy?
Small-cap stocks are typically riskier than their blue-chip counterparts. Naturally, the latter underlying businesses associated with the latter are significantly more stable and boast an incredible track record of healthy returns.
However, it might be a great time to add small caps to your portfolio for outsized returns in the future with the present volatility. Moreover, small-cap stocks offer a remarkable to diversify your portfolio. Big investors are looking for stocks that could benefit from the inflationary effects and faster growth in the long run.
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Hence, here are some of the small-cap stocks to buy that fit that bill.
Small-Cap Stocks to Buy: A10 Networks (ATEN)
A10 Networks (NYSE:ATEN) is an application delivery controller (ADC) specialist. An ADC essentially balances the load on servers, thus improving performance.
Internet traffic has increased exponentially in recent years, which creates security risks and bottlenecks. ADCs help regulate the flow of traffic and limit requests.
The cyber security play is poised to ride multiple growth trends in its sector. It has built an enviable customer base that includes firms such as NEC, UCLA, Yahoo Japan, and several others within a short span.
Revenues during its first quarter surged 14.3%, with a spectacular 80.2% gross margin. If it can continue to produce similar results, it can become a multi-bagger investment in the future.
Celestica (NYSE:CLS) is a supply chain solutions provider to original equipment manufacturers. It has two main segments, including advanced technology and cloud connectivity solutions.
Its business is highly attractive as it attracts robust margins and bolsters its cash balance. Sales growth has been relatively stable, but its profitability has been top-botch. For instance, its net income increased by 60.26% to $130.26 million last year.
Its recently released results show a revenue bump of 27.6% year-over-year to $1.57 billion. Moreover, it expects revenues to be in the $1.575 billion to $1.725 billion range, with adjusted earnings per share of 38 cents to 44 cents, ahead of consensus estimates.
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Moreover, the stock trades at an enticing 0.19 times forward sales, significantly lower than the industry average.
Small-Cap Stocks to Buy: AMMO Inc. (POWW)
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Ammunition manufacturing AMMO Inc. (NASDAQ:POWW) has been delivering strong beats across its top and bottom lines on the back of stellar demand across all calibers of ammunition.
Moreover, the expansion of its manufacturing operations significantly improves margins, which stand at over 40% compared to roughly 11% a year ago.
The company is building an incredible new facility in Wisconsin, which should be operational by summer next year. Moreover, it is already investing in automated manufacturing equipment to reduce labor costs.
Additionally, it’s also directing its efforts to smoothen out issues and add new features to its firearms marketplace, GunBroker.com.
Ammo’s operational performance has been tremendous of late, with triple-digit percentage growth in revenues. In its third quarter, sales have grown by 289.2% to $64.69 million with another earnings beat. It won’t be long before it turns a profit with such fantastic numbers.
Hope Bancorp (HOPE)
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Hope Bancorp (NASDAQ:HOPE) is a leading Asian American bank with a strong presence in South Korea. The full-service bank effectively caters to the growing Asian American community.
South Korea ranks as the second-largest country in terms of foreign direct investment, which enables HOPE to be a major player in the real estate sector in the country. Moreover, HOPE has been on an acquisition spree over the past decade, allowing it to expand its asset base significantly.
The bank has been remarkably profitable, generating a massive net income of $204.6 million last year compared with $111.5 million for the prior year. Also, revenues for the year shot up to $568.6 million compared to $425 million in 2020.
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It has done well to improve its deposit mix, with customer deposits accounting more the bulk of total funding.
Small-Cap Stocks to Buy: Navios Maritime Partners (NMM)
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Navios Maritime Partners (NYSE:NMM) owns and operates dry cargo vessels in multiple continents across the globe. It controls over 140 vessels with a market cap of close to $1 billion and over $3.5 billion in net vessel equity.
Under the dynamic leadership of its CEO, Angeliki Frangou, the shipping giant aims to diversify its revenue streams by expanding into other segments, including dry containerships, bulk carriers, and tankers. The goal is to work on creating sustainable equity value through internal resources.
The business has been growing aggressively and is poised for another strong showing this year on a robust dry bulk market and extraordinarily high fleet rates. Moreover, there is also immense upside potential in its tanker segment, struggling lately.
Perion Network (PERI)
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Perion Network (NASDAQ:PERI) is a small-cap ad tech platform that targets two main advertising spaces: Display through Connected TV and Search through Microsoft’s Bing search engine.
More than 50% of its sales were generated through Bing last year, but of late, the display division has outgrown its search business.
The company CEO Doron Gerstel’s efforts to streamline the business have borne fruit with strong top and bottom-line growth. The goal is to focus on fast-growing segments and divest the unprofitable ones. The firm’s first-quarter results were highly impressive, with a 39.5% growth in revenues to $125.3 million.
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Moreover, it raised its revenue outlook from $620 million to $640 million from the previous outlook of $610 million to $630 million. This comes when its peers are witnessing a slowdown in ad demand.
Small-Cap Stocks to Buy: Bassett Furniture Industries (BSET)
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Bassett Furniture Industries (NASDAQ:BSET) is a pure-play furniture manufacturer, retailer, and wholesaler based in the Southern U.S. state of Virginia. Its business has performed astonishingly over the past decade, with 2021 being its best year yet. It generated a whopping $487 million in sales, representing a 26.2% increase from the prior-year period.
The momentum has continued into the first quarter this year, where net sales rose a healthy 16% from the prior-year quarter. Orders were 25% from pre-pandemic levels, while the wholesale backlog and shipments increased by over 16%.
With a flexible liquidity position and relatively low valuation levels, BSET is likely to perform well for the foreseeable future. Furthermore, BSET’s shareholder rewards are noteworthy.
It offers an enticing dividend yield of 3.37% with a payout ratio of roughly 30%. Also, it recently increased its share repurchase authorization to approximately 25% of its market cap.
On the publication date, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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