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Stock Market Analysis

MyWallSt’s 5 Favorite Small-Cap Investments, Ranked

Here are 5 great small-cap investments for investors who don’t mind carrying some risk

Though maybe not ideal for the risk-averse investor, we’re confident that these 5 small-cap companies will be rewarding for investors in the long-term. 

1. iRobot

iRobot (NASDAQ: IRBT) designs and builds consumer vacuum and mop robots. Robotics have advanced in recent years, so more consumers have become open to the concept of buying an automated vacuum cleaner. The market is hugely untapped, giving iRobot plenty of room to grow. The $3.5 billion company saw Q4 revenue grow by 28% from $426.8 million in 2019 to $544.8 million in 2020, with 2020 full-year revenue increasing by 18% to $1.43 billion in 2020 from $1.21 billion in 2019.

This growth came primarily as a result of an 86% increase in premium robot revenue (list price of $500 or higher), as well as a 36% increase in overall unit growth. The company has seen growth of 75% in the U.S., 22% in EMEA, and 12% growth in Japan, with plans to expand further into Asia though the pandemic has slightly delayed this expansion. 

2. Retail Investment Opportunity Corporation

Retail Investment Opportunity Corporation (NASDAQ: ROIC) is a $1.77 billion real estate investment trust (REIT) that specializes in the acquisition, ownership, and management of grocery-anchored shopping centers across the U.S. This REIT specializes in locations with densely populated communities, diverse and affluent demographics, above-average household income, and limited new construction in predominantly the West Coast. 

96% of the corporation’s portfolio consists of grocery-anchored shopping centers, which are great at riding out recessions and economic turmoil and they are quite resistant to e-commerce. During Q3 2020, the company collected 99.3% of what it billed, meaning the pandemic and recession have had a minuscule impact on its Q3 2020 FFO (funds from operations) of $31.6 million. 

3. Evolent Health

Evolent Health (NYSE: EVH) is a health company with a $1.7 billion market cap that partners with payers and providers to reduce the cost of healthcare while improving the quality of care. The company carries out data analysis to undergo targeted interventions for its patients based on their medical records and diagnoses. Patient appointments and outcomes are recorded to consistently improve the product. The company is working on securing long-term contracts with a hands-on, real-world, quantitative approach to its clients’ journeys, rather than gaining all of its research from a lab. 

Profit at Evolent Health is expected to grow 90% in the short-term, and the company recorded a 20.2% YoY increase in GAAP revenue to $264.6 million with an adjusted EBITDA of $12.7 million.

4. Tronox Holdings

This U.K.-based chemical miner and processor worth $2.6 billion is currently trading at around $18 per share and hasn’t yet overcome its October 2017 high of $26.47. Tronox Holdings (NYSE: TROX) notably manufactures Ti02, which is used in pharmaceuticals, cosmetics, paints, and plastics, which have all seen a rise in demand over recent years.

The company enjoys a very high level of inside ownership and has recorded a nice gross profit margin of 22% and a net income margin of 35% over the last 12 months. Tronox announced a preliminary Q4 2020 revenue of $783 million, up from $693 million in Q4 2019 and $429 in Q4 2018. 

5. Virgin Galactic

This stock is not for those with a very low risk tolerance. Virgin Galactic (NYSE: SPCE) is a spaceflight company with close to no revenue or profit and was taken public last year through a SPAC. The company has two main products — spaceflight using the VSS Unity Shuttle (which has gathered over $80 million in deposits), and high-speed travel using Mach 3 aircraft. 

The growth potential in this industry is huge, but so are the risks. The company has seen some major setbacks recently, but it ended Q3 2020 with around $750 million cash on hand, so they still have some runway left. The company is hoping to make significant progress on its suborbital travel and space flight in the coming year. 

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here

Adam Barry
Adam is a contributing writer here at MyWallSt. Adam loves innovative SaaS tech companies; in particular ones that give people the freedom to make money or start a side hustle, like Etsy, Fiverr and Shopify.