5 small cap stocks to monitor in 2021

Equities

A lot of attention has been given to large cap stocks so far in 2021, but what about their smaller cousins? For the canny investor or trader, small cap stocks can offer many exciting avenues to explore.

5 small cap stocks to watch

Small companies to invest in

If you’re familiar with small cap shares, you’ll probably already know their ins and outs. For the uninitiated, these are stocks representing companies with market caps between $300m and $2bn – not exactly small fries, but not in the same megabillion sphere as companies like Apple, Tesla or Facebook.

The US Russell 2000 index is dedicated entirely to these types of stocks. We’ve plucked five stocks listed there that showed positive movements at the tail end of 2020, making them potentials for the year to come.

Small cap shares on the radar

Amongst the best performing lower cap companies are:

  • Strattec Security Corp – Strattec primarily develops, designs, and makes automotive access control systems under its VAST brand. While the company is mostly focussed on US carmakers, like Ford, Chevrolet and Cadillac, it has numerous world-renowned marques on its books. Rolls, Royce, Alfa Romeo, BMW and Audi are some examples. Stattec’s expected earnings for the year-end July 2021 are forecast to enjoy an 100% growth rate. As of December 2020, the firm’s share price had soared 103.8% YTD, showing why this small cap stock is on many investor’s road map.

 

  • Smith & Wesson Brands – The gun manufacturer is another firm where its expected earnings are on course for 100% growth (year-end April 2021). The Nasdaq Zacks Consensus Estimate for the brand rose 412% over the seven days prior to December 11th 2020, and its year-to-date price growth totalled 72.8% in the same period too. Will you pull the trigger on this stock?

 

  • MarineMax Inc. – You would have thought that lockdown’s choppy waters may have scuppered the share price of the US’ largest recreational boat and yacht retailer, but it seems 2020 held calm waters and headstrong breezes for MarineMax. Its stock jumped 87.1% in December 2020 – but take heed: with Covid cases mounting in the US, further potential lockdown measures may mean less people buying pleasure craft in 2021. One to watch, for sure, but with a careful eye from the crow’s nest.

 

  • Novavac Inc. – In a world still struggling to contain Covid-19, pharmaceuticals like Novavac are amongst the most attractive small companies to invest in right now – particularly if their solutions have been bought by governments to combat the virus. On December 16th, Novavac announced the New Zealand government had ordered 10.7 million doses of its NVX-CoV2373 vaccine, which is undergoing stage 3 clinical trials. Moreover, it has generated 3,060% returns for investors over the last 12 months, going to show how vaccine-related firms are a healthy prospect this year.

 

  • VirnetX Holding Corp. – VirnetX is a software developer offering real-time online communications solutions. Think products and services like voice over internet protocol, encryption, file transfer, streaming, and so on. The company announced in early November that it recently had been awarded $502.8 million as part of a favourable verdict from a federal jury pertaining to a patent-infringement lawsuit against Apple Inc, which is more than its current market cap of $368.1m. What’s more, VirnetX is one of the best value small cap shares available, with 12-month trailing P/E ratio of 1.3.

Remember: if you are investing in small cap shares, you should do your due diligence and exercise the same, if not more, levels of caution than you would larger cap stocks. Market caps and prices are subject to high volatility in small caps, so bear that in mind when investing or trading any of the above or similar stocks.