3 Small Cap Stocks With Healthy Price Action

One tenet of the efficient markets hypothesis is that small caps, over time, outperform their larger peers. 

Small-cap stocks are those with a market capitalization between $300 million and $2 billion. 

They do have higher risk profiles than large cap stocks. That’s for a few reasons: Sometimes, there is less liquidity in these stocks, so if even one or two big institutional holders sell (or buy), it can have an outsized impact on share price. 

They’re also not as well known, so investors don’t necessarily pile in if there is good news. In fact, even Wall Street analysts pay scant attention to smaller stocks, as large caps attract more investment, and frankly, there’s more money to be made by issuing reports on the big, well known names. 

On the flip side, small companies are often more nimble and have motivated management. 

Here’s a look at three showing strong technical performance. 

Iron pellet producer Cleveland Cliffs (CLF) is consolidating above its 50-day moving average, after rallying a whopping 119% in the past year. 

Despite the current pullback, the stock is still up 14% year to date. 

It closed Friday at $16.60.

Cleveland Cliffs is due to report quarterly earnings on February 25. Analysts are eyeing net income of $0.28 per share, an increase over the year-earlier quarter’s profit of $0.25 per share. 

Prospective buyers should always use caution as earnings are imminent, as even the smallest negative surprise can send the stock sharply lower.

In the biotech arena, genetic-testing specialist NeoGenomics

NEO
(NEO) teamed up with Parexel

PRXL
to enhance application of medicines in oncological clinical trials.  

The stock is up 13% since the partnership was announced on February 4. 

One encouraging sign for the stock: The number of mutual funds owning shares grew from 407 in December 2019 to 519 a year later.

Analysts expect full-year earnings of $0.28 per share, which would be a 300% increase over 2020. Investors will learn soon enough what the final number is for 2020, as NeoGenomics reports fourth-quarter results on February 24 before the market open.

 A third small cap worth watching is Iridium Communications

IRDM
(IRDM), which provides voice and data communications to hard-to-reach areas throughout the globe, whether by air, sea or land. 

The stock gapped down more than 12% on February 9, following a fourth-quarter loss of $0.06 per share, better than estimates of an $0.08 per share. That represented a big improvement over 2019’s fourth-quarter loss of $.82 per share.

The company issued a bullish 2021 forecast, saying revenue would grow 3% over 2020. 

Even so, analysts don’t expect profitability this year, pegging the full-year loss at $0.13 per share, while eyeing profit of $0.05 in 2022.

On the chart, the stock is holding above its 50-day moving average as it forms a consolidation.

Published at Sun, 14 Feb 2021 19:16:41 +0000

By Editor