Think Small, Win Big: 4 Small-Cap Stocks You Should Consider

Small-cap stocks, defined as stocks that have a market capitalization of between $300 million and $2 billion, may be the best investments of the future. In periods of economic growth, small-cap stocks tend to grow at faster rates than larger stocks. 

With the U.S. economy on the verge of major growth for the first time since the coronavirus pandemic, these smaller stocks may hold the key to big gains. Although riskier than stocks from established and well-known corporations, the rewards can make it well worth it. 

In this article, we will discuss our top picks for small-cap stocks to invest in for 2021. We’ll also go over why it’s sometimes better to invest in small-cap stocks over bigger stocks, and how to recognize when to invest in small-cap stocks. 

Go big, or go small?

In 2020, the Russell 2000 index of small-cap stocks grew by over 86.7%. This astronomical growth dwarfed the 48.8% gain recorded by Refinitiv for the large-cap S&P 100 Index. Although small-cap stocks were affected heavily during the height of the pandemic, these same stocks rebounded exponentially towards the end of the year when the economic outlook was brighter. With record numbers of Americans being vaccinated, the future is looking even better. 

During times of economic recovery, small-cap stocks can be wise investments because they are usually made up of smaller, domestic companies that are heavily directed by the state of the American economy. 

Although you can receive great gains from small-cap stocks, according to London-based trader and financial advisor Alex Williams of Hosting Data, there are even better choices for long-term investments. 

“While basic trading is great for short-term profits and even for its own sake, sometimes you need to know what platforms to use for long-term investment strategies,” says Williams. “In fact, most people use the stock market for retirement and nothing else, leaving day trading and other short-term strategies to economic gurus.”

Another advantage that smaller companies have is that they are more agile, with the ability to adapt and implement new strategies with quicker speed because of smaller employee bases and management circles. 

Here are four small-cap stocks to invest in for 2021:

1 - Boston Omaha Corp BOMN

Founded when its two CEOs purchased a controlling stake in a real estate business, Boston Omaha is poised for real growth. When one considers how strong the current real estate market is, the promise of growth seems even greater.  

However, Boston Omaha’s investments are much more diverse than just real estate. The company owns large stakes in the surety insurance, fiber and broadband and advertising industries. In one of their best investments, which was in Dream Finders Homes, the two CEOs invested $22 million from 2017 to 2019 and their stake is now worth $100 million. 

2 - GoPro Inc GPRO

Surprised to see this stock on the list? After all, this stock tanked horribly since its IPO in 2014, tumbling 60% since that date. However, when there’s no risk, there’s no reward - as they say. Although GoPro has had a bad few years, GoPro management is making some new decisions that may just change the company’s direction.

One such strategy change is an investment in Direct-To-Consumer (DTC) sales, which have increased sales on their website by almost 300% since the end of 2019. Furthermore, the company has announced a new subscription service that is steadily gaining in popularity, from roughly 300 million subscribers in 2020 to 760,000 now. The subscription service, which offers photo editing software, discounts on their website and cloud storage for their files, could be a game-changer for GoPro.

It’s a risky investment, but with GoPro stocks selling at only $11.70 as of the writing of this article, there is a lot of room for growth. The sales forecast for this company is optimistic with their DTC focus and new subscription service. 

3 - LivePerson, Inc LPSN

The pandemic accelerated a growing tendency people have to want to do everything online. Live chat as well as artificial intelligence-driven data for robochats has played an important part in how American consumers interact with companies.

Interestingly, LivePerson already has an established presence in the live chat industry, pioneering the new technology back in 1990. The most exciting development for this company is the new LivePerson Engage Software that was recently announced, which allows consumers to directly message companies through apps such as WhatsApp, Facebook Messenger and a variety of other popular platforms. 

Like many tech companies, LivePerson grew steadily in valuation in 2020 but recently experienced a pullback, making its valuation even more attractive and poised for growth. 

4 - Clearfield Inc CLFD

During the pandemic, internet connection at home took on a new meaning. No longer used for casually surfing the internet, remote workers required high-speed, cybersecure internet connections for getting their job done. 

Enter Minneapolis-based Clearfield, a company focused on fiber optics. Last year’s demand for high-speed internet for Zoom calls caused the stocks to soar substantially However, the company projects even more growth for 2021 - and “growth” is a word we like to hear. 

Conclusion

Whether they are small startups with a lot of promise, or tried-and-true companies with new strategies, markets or technology that will propel them to the top, there are lots of viable options in small-cap stocks to consider.