Small-cap stocks occasionally get a bad rap from Wall Street and investors. Small-caps, often defined as companies valued at less than $2 billion, are usually thought of as risky and volatile investments. Yet if we look back at 2016, small-cap stocks absolutely trounced theS&P 500. TheVanguard Small-Cap ETFwound up gaining 16.6% for the year, compared to just a 9.5% gain for the broad-based S&P 500. Investors who take the time to analyze small-cap stocks can occasionally walk away with absolute gems.
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The good news for you is there are always small-cap stocks being overlooked by Wall Street. If you're looking for the next diamond in the rough, consider these four top small-cap stocks this spring.
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Silver Standard Resources
Gold and silver mining stocks have been solid performers since the beginning of 2016, and in spite of all three major U.S. indexes hitting all-time highs, hedge plays (gold and silver) have worked out well for investors. One small-cap hedge to consider this spring is Silver Standard Resources (NASDAQ: SSRI).
Silver Standard has made quite the transition over the past year. Its acquisition of Claude Resources added what will amount to 70,000 to 80,000 ounces of gold production per year, which is on top of the more than 200,000 ounces of gold production it expects annually from the Marigold mine in Nevada.
It's also likely not done expanding production at the Santoy underground mine, acquired when it purchased Claude Resources. In October, Silver Standard entered into an agreement with Eagle Plains Resources to acquire an 80% interest in the Fisher project, which is the adjacent site to the Seabee and Santoy mines.
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Even more recently, the company announced that it would exercise its option to form a joint-venture with Golden Arrow Resources for the Chinchillas project in Argentina. Silver Standard had been facing the end-of-life for its Pirquitas property prior to the formation of this joint-venture, meaning the property could generate new silver production for the coming decade and keep Silver Standard from becoming wholly reliant on gold. Construction is expected to begin in the third quarter, with the first ore delivery expected in the second half of 2018. Silver Standard will have a 75% interest in the property.
With the company now having multiple avenues to expand production, and uncertainty over Britain's exit from the EU and Trump leading the U.S. still high -- which is good news for precious metals -- Silver Standard Resources could be an intriguing small-cap stock to consider this spring.
Another small-cap company that's worth a look blends a perfect amount of financial knowledge with some technical pizzazz. I'm talking about none other than Bankrate (NYSE: RATE).
The past couple of years for Bankrate have been a bit of a rollercoaster ride for shareholders. Its stock has lost nearly half of its value since the summer of 2014, and the company has missed Wall Street's profit projections in five out of 10 quarters. However, the company's management team has made serious strides toward reinvigorating its core operations, and we began to see this hard work pay off in the company's fourth-quarter earnings report.
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For the quarter, revenue grew by 21% to $113.6 million, with sales up 17% for the entire year. A big reason for this jump was its bread-and-butter CredtiCards.com asset, which provides comparisons on credit cards and credit information to consumers. Q4 sales jumped by 32% year-over-year to nearly $84 million, while content market revenue increased 40% from the sequential third quarter. It's highly possible that with the Federal Reserve in a tightening stance consumers will turn more frequently to CreditCards.com for comparisons and advice as variable credit card interest rates rise. That's a great formula for Bankrate to be able to increase its ad rates and rack up extra sales.
Bankrate's banking segment, which includes mortgage service inquiries, still managed to increase revenue by 6% on a year-over-year basis to $26 million in the fourth quarter. Even if this segment were to slow during the monetary tightening process, the credit cards segment is three times as large, meaning Bankrate can still thrive.
With double-digit percentage sales growth expected for the near future, Bankrate could be a turnaround story to look into this spring.
Unlike the other companies on this list, Fossil Group (NASDAQ: FOSL), a retailer of watches, leather products, and jewelry, looks like a full-scale disaster. Shares of the company are down over 85% in less than four years' time as traditional mall retailers have struggled against a growing e-commerce presence, and watchmakers of all forms have been battling the emergence of the smartwatch.
However, Fossil has three factors working in its favor that suggest a turnaround is possible.
Image source: Fossil Group.
First, Fossil is a brand-name product that often sells at a discounted price. Consumers have shown time and again that they value brand-name products at a great price, which lends hope that Fossil will continue attracting consumers.
Second, history has shown that consumer buying habits are fickle. While the stock's moves upward and downward might seem more magnified this time around, I can assure you that Fossil has undergone protracted sales and profit contractions before, and that management has successfully responded to the issues the company was facing each and every time.
Finally, Fossil has more than doubled down on its own smartwatch efforts, since it's been a rapidly growing category for the company. It's also reducing costs by closing underperforming retail stores, and investing heavily in its e-commerce platform, which has also grown at a reasonably solid rate. These changes won't happen overnight, but within a few quarters we should see its business stabilizing and margins expanding.
Last but certainly not least, social media interaction company MeetMe (NASDAQ: MEET) is a rapidly growing small-cap stock you'll likely want on your radar this spring.
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Last year was a transformative year for MeeMe. It acquired mobile flirting app Skout for $55 million in cash and stock. The addition of Skout, along with its self-named brand, pushed its monthly active user count above the eight million mark, which suggests just how in demand social engagement apps are at the moment. MeetMe isn't done, either. Its acquisitions of if(we)'s Tagged and hi5 brands are expected to push its monthly active user count over 10 million.
Through organic growth and the acquisition of Skout, MeetMe wound up growing its revenue by 24% to $76.1 million in 2016, with more than 90% of its sales coming from the mobile side of the equation. Here's the beauty of MeetMe's business model: it's generally low cost, save for the upfront expenses tied to its acquisitions, meaning the more users it can bring into its portfolio, the more leverage it has with regard to mobile ad pricing. This is why the company ended 2016 with an adjusted EBITDA margin of 39%!
Furthermore, MeetMe now has a healthy amount of cash on hand following a March share offering that generated around $46 million in gross proceeds. With no debt and now with more than $60 million in cash and cash equivalents on its balance sheet, MeetMe is in an advantageous position: it can continue to add new social interaction apps to its portfolio (some of this cash is going to fund its if(we) acquisition). This is a hot small-cap tech stock you'll want to know this spring.
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