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6 Small Hidden Gems Flying High in November Defying Pandemic

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Wall Street has been performing very well in November notwithstanding last week's volatile trading. Resurgence of coronavirus cases has failed to dampen market participants' sentiments owing to positive developments on the vaccine front and hopes of the resumption of Congressional negotiations for a fresh round of fiscal stimulus.

Meanwhile, small-cap stocks have outperformed their large-cap peers in November. Month to date, large-cap-specific indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 11.7%, 9.4% and 8.9%, respectively. On the other hand, small-cap-centric indexes —  the Russell 2000 and the S&P 600 — have climbed 18.2% and 19% respectively.

At this stage, it will be prudent to invest in small-cap stocks with a favorable Zacks Rank that popped in November and still have upside left.

Positive News on COVID-19 Vaccine Development

On Nov 19, AstraZeneca plc (AZN) said that its experimental COVID-19 vaccine jointly developed by the Oxford University showed robust immune response in older adults in its phase 2 clinical trials. The combined dosing analysis from both full and half dose regimens found average vaccine effectiveness of 70.4%.

Meanwhile, on Nov 18, Pfizer Inc. (PFE) and BioNTech SE (BNTX) announced that their jointly developed potential vaccine BNT162b2 was more than 95% effective in preventing COVID-19 in trial participants with no previous evidence of the SARS-CoV-2 infection. These two companies have submitted for Emergency Use Authorization to the FDA.

On Nov 16, Moderna Inc. (MRNA) reported that the preliminary phase III clinical trial data revealed its potential coronavirus vaccine is more than 94% effective in preventing COVID-19. The study was conducted in collaboration with the National Institute of Allergy and Infectious Diseases. On Nov 10, the FDA had granted emergency authorization to a COVID-19 antibody treatment of Eli Lilly & Co. (LLY).

Fresh Initiative for a New Coronavirus-Aid Package

On Nov 20, Senate Minority leader Democrat Chuck Schumer said that Senate Majority leader Republican Mitch McConnell has agreed to resume negotiations over a potential new Covid-19 relief package.

Last week, the Trump administration had decided not to negotiate further with Democrat House Speaker Nancy Pelosi regarding a new stimulus. Instead, Senate Majority Mitch McConnell will be the Republican negotiator, who is well known for his tough stand on a new tranche of coronavirus-relief package.

Stimulus Helps in Revival of Small Businesses

On Jun 15, the Fed initiated a lending program of up to $600 billion to small and mid-sized businesses. Under this program, businesses with up to 15,000 employees or revenues of up to $5 billion will get a loan in the range of $250,000 to $300 million for 5 years at floating rate.

On Oct 30, the central bank reduced the minimum loan size to $100,000 from $250,000 and decided to ease restrictions on debt for companies already participating in the Paycheck Protection Program. The central bank will encourage retail banks to lend out to struggling companies and will purchase 95% of each loan extended under the facility.

Given their small-scale of operations, small businesses are generally cash-starved. These organizations operate on a thin profit margin and most new businesses are yet to achieve profitability. Therefore, the reopening of the economy will immensely benefit small businesses.

Our Top Picks

We have narrowed down our search to six small-cap stocks that have surged more than 20% month to date. These stocks have a strong growth potential and witnessed robust earnings estimate revisions in the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our six picks month to date.

 

HighPoint Resources Corp. HPR is engaged in the exploration, development and production of oil, natural gas, and natural gas liquids in the United States. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved more than 22.5% over the last 30 days. The stock price has jumped 76.9% month to date.

Aviat Networks Inc. AVNW designs, manufactures, and sells a range of wireless networking products, solutions and services in North America, Africa, the Middle East, Europe, Russia, Latin America, and the Asia Pacific. The company has expected earnings growth of 95.4% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved more than 18% over the last 30 days. The stock price has climbed 76% month to date.

Motorcar Parts of America Inc. MPAA manufactures, remanufactures, and distributes heavy-duty truck, industrial, marine, and agricultural application replacement parts. The company has expected earnings growth of 6.3% for the current year (ending March 2021). The Zacks Consensus Estimate for the current year has improved more than 13.3% over the last 30 days. The stock price has soared 32.1% month to date.

South Plains Financial Inc. SPFI operates as a bank holding company for City Bank that provides commercial and consumer financial services to small and medium-sized businesses and individuals. It operates through two segments, Community Banking and Insurance.

The company has expected earnings growth of 37.9% for the current year. The Zacks Consensus Estimate for the current year has improved more than 37.1% over the past 30 days. The stock has rallied 24% month to date.

First Bank FRBA provides various banking products and services to individuals, businesses and governmental entities. The company has expected earnings growth of 6.3% for the current year (ending March 2021). The Zacks Consensus Estimate for the current year has improved more than 17.1% over the last 30 days. The stock price has surged 23.9% month to date.

First Internet Bancorp INBK operates as the bank holding company for First Internet Bank of Indiana that provides commercial and retail banking products and services in the United States. The company has expected earnings growth of 6% for the current year. The Zacks Consensus Estimate for the current year has improved more than 38.5% over the last 30 days. The stock price has advanced 22.1% month to date.

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Aviat Networks, Inc. (AVNW) : Free Stock Analysis Report
 
Motorcar Parts of America, Inc. (MPAA) : Free Stock Analysis Report
 
First Bank (FRBA) : Free Stock Analysis Report
 
First Internet Bancorp (INBK) : Free Stock Analysis Report
 
HIGHPOINT RESOURCES CORP (HPR) : Free Stock Analysis Report
 
South Plains Financial, Inc. (SPFI) : Free Stock Analysis Report
 
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