To be quite blunt, small-cap stocks to buy are like the chimpanzees of the equities space. While you may mistake a chimp for being weak due to its relatively short stature, that would be a mistake. These volatile apes can probably rip your arms right off your sockets.
So yes, small-cap stocks to buy are incredibly powerful but they’re unpredictable – just like chimps. As beautiful as they may be, chimps belong in the wild. If you don’t respect that, you will find out the hard way that the average male chimp is about four times stronger than the average male human. Similarly, you must respect these small-capitalization plays.
Without respect and careful due diligence (which is your responsibility), these enterprises – which feature a market cap between $300 million to $2 billion – can devastate your portfolio. If you’re mature enough to handle the responsibility, these small-cap stocks to buy offer a legitimate path to 2x gains in 2024.
NerdWallet (NRDS)
A personal finance company, NerdWallet (NASDAQ:NRDS) may not be getting much attention on the Street, thanks in large part to its choppy chart performance. Since the start of the year, NRDS lost about 14% of its equity value. Still, its fundamental narrative – providing financial information to individuals – is as relevant as ever.
One element that might make NRDS one of the best small-cap stocks to buy centers on its implied volatility (IV) curve. Think of IV as a baseball player’s situational stat sheet. In certain gameplay situations, a player may be statistically likely to put a ball into play (though it’s not a guaranteed outcome). Well, with NRDS, IV increases alongside a rising strike price. Technically, this could be signaling anticipation of upside among traders. Thus, all other things being equal, NRDS call options should be priced higher to reflect this sentiment.
Best of all, analysts peg NRDS a strong buy with an average price target of $17.60, implying 112% upside potential.
Clean Energy Fuels (CLNE)
Based in Newport Beach, California, Clean Energy Fuels (NASDAQ:CLNE) is a renewable natura gas specialist. Primarily, it provides fueling solutions for fleet vehicles such as heavy and medium-duty trucks and school buses. Politically and ideologically, Clean Energy aligns with contemporary sentiments, making CLNE one of the small-cap stocks to consider.
As with NerdWallet above, Clean Energy appears to benefit from positive options trading dynamics. Though the derivatives market is limited based on the company’s $1.03 billion market cap, its IV curve trends upward alongside a rising strike price. Relatively speaking, fewer traders may be mitigating for downside risk and more may be anticipating upside movement.
To be clear, you want to be careful with interpretating complex derivative trading action. Still, with CLNE already losing over 26% in the trailing year, speculators could be interested in gambling. Overall, analysts peg CLNE as a unanimous strong buy with a $9.92 price target, implying 114% upside potential.
FREYR Battery (FREY)
One of the riskiest small-cap stocks to buy, FREYR Battery (NYSE:FREY) shed almost 28% of its equity value since the January opener. Over the past 365 days, FREY gave up nearly 53%. Still, many speculators are hopeful about Freyr given its implications for global decarbonization. Developing high-density battery cells, the enterprise aims for facilitating a new era in mobility and transportation.
Like other speculative ventures, FREY prints an intriguing IV curve. From the $5 strike price to $16, IV soars from 69% to 547%. To be fair, at the extreme end ($18 strike), IV drops back down to 193%. On the other hand, IV only rises to 1.39% at the lowest end of the range ($3 strike).
As one of the small-cap stocks, FREY’s derivatives market isn’t as fleshed out as the derivatives for say blue-chip securities. And to be sure, Freyr’s financials – aside from its cash holdings – leave much to be desired. Still, it’s not unreasonable to see shares jump higher.
And that’s because analysts peg FREY as a strong buy with a $13.50 price target, implying 120% upside potential.
NaaS Technology (NAAS)
An enticing idea among small-cap stocks to buy, NaaS Technology (NASDAQ:NAAS) is committed to becoming the world’s leading provider of new energy services, according to its website. From one of its filings, NaaS is the largest third-party charging network in China. It also adds that it facilitated 20.1% of the total public charging volume in China in 2022.
Fundamentally, the narrative should attract extreme market gamblers. With China representing the world’s largest market for automobiles, it’s an arena ripe for the integration of electric vehicles. And given the potential upside, public charging in that country would be a must for the EV rollout. Since NaaS appears to have first-mover advantage, it could be a great pickup.
In full disclosure, NaaS’ financial profile is messy. You don’t want to jump in without acknowledging the risks. Nevertheless, NAAS does have a buy rating from TFI Asset. The price target stands at $13, implying over 122% upside potential.
Evolus (EOLS)
Another Newport Beach-based entity, Evolus (NASDAQ:EOLS) is a performance beauty specialist. Based on its website, Evolus is best known for its product Jeuveau, a neurotoxin used for the treatment of moderate to severe frown lines. Over time, EOLS could be an attractive idea for small-cap stocks to buy.
Fundamentally, millennials and members of Generation Z have grown up in the social media ecosystem. Therefore, young folks may have a more emotional connection to looking youthful than prior generations. So, it’s possible that in a bid to maintain vitality, Jeuveau may see increased demand.
In the spirit of full disclosure, though, the IV curve for EOLS spikes in the deep in-the-money zone. This dynamic suggests that traders could be mitigating for tail risk (i.e. black swan event). Given its wild nature in the charts, all market participants should be cautious. Still, analysts peg EOLS a consensus strong buy with a $20.57 price target, implying nearly 123% upside potential.
SoundHound (SOUN)
An audio and speech recognition company, SoundHound (NASDAQ:SOUN) develops speech recognition, natural language understanding, sound recognition and search technologies. One of the most intriguing ideas for small-cap stocks to buy, those interested in gambling on the artificial intelligence wave may want to add SOUN to their watch list.
Since the start of the year, shares gained almost 73% of equity value. Still, it’s possible that traders may be anticipating more positive returns. From the $2.50 strike price to $5, IV rises from 102% to 256%. To be sure, SOUN only carries a market cap of just under $544 million. Thus, the derivatives market just isn’t as fleshed out like an established company would be.
Still, curious retail investors should note that the latest big block trade for SOUN was for the purchase of $3 call options. It’s possible this stemmed from an institutional investor. Lastly, analysts peg SOUN a unanimous strong buy with a $5.05 price target, implying over 123% growth.
DocGo (DCGO)
While incredibly compelling, DocGo (NASDAQ:DCGO) is arguably the riskiest idea on this list of small-cap stocks. Per its website, the company is a technology-enabled healthcare service provider focused on mobile care and telehealth. Essentially, it fills the critical gap between clinical care and telehealth, making it wildly relevant.
One fundamental catalyst that may benefit DocGo is the aging population. With baby boomers retiring en masse, the concept of mobile care should skyrocket. Therefore, DocGo could address an emerging need. It also facilitates job security for various healthcare professionals.
However, DCGO has lost more than 15% of value since the January opener. In the past 365 days, it slipped 36%. Adding to the complexity, DCGO’s IV curve creates an arch shape (or upside-down U). Among several explanations, there may be unusual liquidity concerns for options at certain strike prices.
What’s clear, though, is that analysts peg DocGo a unanimous strong buy. Their price target lands at $14, implying nearly 124% upside potential.
On the date of publication, Josh Enomoto 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.
