7 A-Rated Small-Cap Stocks To Buy
When growth kicks in, small caps come to the fore
By all evidence, it looks like the U.S. economy and the global economy are finally recovering — without the aid of central banks at this point.
There may be some disagreement about how strong the recoveries are, or whether they’re going to last, but few disagree that they are in fact growing once again.
And that growth, especially in its initial phase, is great news for small-cap stocks.
Here are seven A-rated small-cap stocks to buy to take advantage of this turnaround. All but one are less than $1 billion in market cap, which means they’re truly leveraged to growth.
Remember, these stocks might be volatile since they don’t have a huge amount of institutional support and traders can run them up and down on any news that may come across the wire. But over the long haul, they will be great performers because they’re in the sectors most leveraged to growth moving forward.
A-Rated Small-Cap Stocks: Wireless Telecom Group (WTT)
Wireless Telecom Group Inc (NYSEAMERICAN:WTT) specializes in wireless telecom, of course. But its main clients are secure systems for the military, aerospace and small cellular networks.
It has four subsidiaries that operate in very specific sectors — Boonton, CommAgility, Microlab and Noisecom. This is a behind-the-scenes player. But that’s a good thing because its clients are very particular, so there’s a significant barrier to entry.
What’s more, because of its niche market, Wireless Telecom could be a very tempting takeover target for a telecom company with deeper pockets that could expand the product lines and customer base WTT currently has.
Given the global tensions and growing security concerns, WTT is in a bull market.
A-Rated Small-Cap Stocks: SORL Auto Parts (SORL)
SORL Auto Parts Inc (NASDAQ:SORL) is a Chinese joint venture that is the leading brake and safety-related equipment original equipment manufacturer (OEM) for Chinese made cars, commercial trucks and buses.
As the Chinese economy continues to expand at nearly 3 times the rate of the U.S. market, the domestic car industry isn’t just looking to fill the needs of Chinese consumers and industries. It now has its sights set on export markets as well.
The Chinese have made big inroads in Africa and South America, working with governments to build strategic relationships. And ultimately, that means bringing in Chinese exports into the local economies.
SORL also has a strong aftermarket business that already has significant international markets.
A-Rated Small-Cap Stocks: Commercial Vehicle Group (CVGI)
Commercial Vehicle Group Inc (NASDAQ:CVGI) is in an interesting niche. It manufactures cab-related products for commercial and heavy-duty vehicles, like seats, sleeper cabs, dashboards, etc.
Its customers are in North America, Asia and Europe. That means as these economies grow, the demand for sending goods from ports to inland distribution hubs will grow as well. The more goods that are being consumed, the greater the need for moving those goods to market.
And it also has contracts for military vehicles, which are always in demand — especially with a bigger defense budget on the horizon.
A-Rated Small-Cap Stocks: Mesabi (MSB)
Mesabi Trust (NYSE:MSB) may sound like an exotic company that has operations in some far off land, but it’s actually a nearly 100-year-old company that mines iron ore out of Minnesota’s Iron Range.
In the past year, it is up 80%, and that’s off its highs of over 90% in late January. What’s more, MSB delivers a nearly 10% dividend because it is set up as a trust. Like a master limited partnership (MLP) or real estate investment trust (REIT), its net profits are distributed to shareholders as a dividend.
The tariffs on imported steel and aluminum that the Donald Trump administration have put in place may work to MSB’s favor. But regardless, an expanding economy means higher demand for industrial commodities like steel, and that means higher prices and higher profit margins.
A-Rated Small-Cap Stocks: Kewaunee Scientific Corporation (KEQU)
Kewaunee Scientific Corporation (NASDAQ:KEQU) makes laboratory, healthcare and technical furniture.
The firm has been around since 1906, but it wasn’t until after World War I that it started to grow its business from its North Carolina roots. In the 1920s, it was one of the first U.S. firms to get a foot in the door in this sector — previously most of the lab and healthcare furniture was being imported from Europe.
By WWII, KEQU was outfitting the labs for the Manhattan Project.
Now, it has established itself as the top U.S. firm in this important and growing niche market.
What’s more, KEQU also delivers a rock-solid 2.3% dividend that has been growing for the past decade. Add to that a 12-month return of 25%, and furniture seems a bit sexier than it usually does.
A-Rated Small-Cap Stocks: Rayonier Advanced Materials (RYAM)
Rayonier Advanced Materials Inc (NYSE:RYAM) is a 2014 spinoff from timber REIT Rayonier Inc (NYSE:RYN).
Its main business is cellulose, which is used in everything from cigarette filters to LCD screens to pharmaceuticals to paint. And given the fundamental nature of its product line, it is in prime position to benefit from an expanding economy, since the uses for its main products all support a growing economy.
While the business is pretty cyclical, the fact is that the barriers to entry here are high and RYAM is one of the top suppliers to the U.S. marketplace. At this point, RYAM controls about 30% of the cellulose market.
The stock delivers a 1.4% dividend and the company, while treading water for a while, is up 21% in the past 12 months. And the best is yet to come, as demand for its products grows along with the economy.
A-Rated Small-Cap Stocks: Kingold (KGLI)
Kingold Jewelry Inc. (NASDAQ:KGJI) is the leading producer of 24-karat gold jewelry in China. There are a few reasons why this is important.
First, the Chinese government has been cracking down on cryptocurrencies because it wants to keep Chinese money in Chinese yuan. It doesn’t want money leaving the country. And now, one of the only ways to get money into a “movable” asset is to buy gold.
Second, as the economy grows, the Chinese will have more money to lock away and, given the current trade war talk, gold will be the safest place to keep it.
Third, given the current volatility of the markets and the volatility around the globe politically, gold is a great investment as a store of value. It is likely that many investors will start to look to gold as hedge again as cryptocurrencies get increasingly volatile and the markets stay unpredictable.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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Category: Small-Cap Stocks
