When discussing micro-cap stocks, it’s important to recognize their general overlap with the world of penny stocks. These stocks trade as shares of companies with market capitalizations between $50 million and $300 million. While those numbers may sound worthy to the individual investor, they represent a generally risky position for a handful of reasons.
The first is that micro-cap stocks are often derived from young and relatively unproven companies. Just because a company publicly trades on the Nasdaq does not make it a safe investment. The second is that these micro-cap stocks tend to experience less frequent trading than more major companies. This low liquidity can make it harder to sell out of a position should it no longer be lucrative.
Bearing these risks in mind, savvy investors know the value of getting in early on a profitable company. That’s because all investing is a function of growth multiplied by time — the more time, the more potential for growth for your portfolio. Thus, here are three solid micro-cap stocks to consider if you’re comfortable with the risk.
Amplify Energy (AMPY)
Small oil and natural gas companies might not be the first thing to come to mind when considering micro-cap stocks, but Amplify Energy (NASDAQ:AMPY) is worth putting on your radar. The company is an independent developer focused on acquiring and exploiting oil and natural gas properties exclusively within the United States.
Geographically, the company focuses on low-cost regions for development like Oklahoma, East Texas and North Louisiana, with more expensive basins like the federal waters off the coast of Southern California and the Rocky Mountain West. Year-to-date, the company is up over 12% in value as part of its generally promising financial performance.
Though the company experienced a loss of $9.4 million for the first quarter of 2024, it succeeded in surpassing earnings-per-share forecasts by 0.85%, lending hope that its expansion expenses would not hamper its long-term growth. Thus, investors might want to get in early on this geographically diverse and well-managed company.
Spero Therapeutics (SPRO)
Perhaps one of the biggest challenges facing modern medicine today is drug-resistant bacteria. This is especially true when considering that just in the U.S. alone more than 2.8 million antimicrobial-resistant infections occur annually, resulting in 35,000 deaths. To address this problem and take advantage of a new sector of antibiotic treatments, Spero Therapeutics (NASDAQ:SPRO) has gone all-in on developing medicines for multidrug-resistant infections.
Currently, the company is developing several drugs at varying points in the development pipeline, but its most promising candidate seems to be SPR206 under the brand name. This drug has reached Phase 2 clinical trials and has shown effectiveness against bacterial pneumonia acquired from hospital ventilator treatments.
While SPRO certainly isn’t the only company focused on developing treatments for multidrug-resistant bacteria, its status among micro-cap stocks gives it significant potential to spike following a Food and Drug Administration regulatory approval.
Oramed Pharmaceuticals (ORMP)
Another fledgling biotech company, Oramed Pharmaceuticals (NASDAQ:ORMP) aims to address drug accessibility with its product pipeline. One of the factors that can significantly complicate or increase the cost of a treatment is its delivery route. As such, treatments that require injections to successfully enter the body tend to be more expensive due to the cost of syringes, professional injection services and the overall supply chain involved with jabs.
Oramed aims to do away with this, particularly in the insulin delivery sector, by developing oral capsules that bypass stomach absorption and enter the intestine for direct uptake into the bloodstream. In the case of insulin, this would make treating diabetes as simple as taking a pill rather than relying on expensive pumps or complicated needles.
This route of treatment would also expand insulin coverage to developing countries where infrastructure does not allow for easy storage and accessibility to syringes while also nullifying infection risks as a result of unsanitary injection practices.
On the date of publication, Viktor Zarev 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
