7 Small-Cap Stocks Set to Soar as Interest Rates Stabilize
Investors are loading up on small-cap stocks and other growth stocks as the light at the end of the tunnel brightens. The Federal Reserve is signaling that peak rates may already have arrived. In fact, if inflation continues to subside and the worst is over, now is the time to act.
Interest-rate sensitive equities are among the best-positioned assets to invest in when rate peaks occur. These are also referred to as growth stocks which tend to require funding to catalyze high growth. In other words, the anticipation of an end to rate hikes makes the 7 stocks below a smart choice now as the Fed signals that rates have peaked.
Small-Cap Stocks: ACM Research (ACMR)
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ACM Research (NASDAQ:ACMR) is an easy choice for investors in small-cap stocks right now. It’s a picks-and-shovels stock play in the semiconductor industry that continues to grow at a healthy rate. ACM Research provides cleaning equipment to a chip industry that is at the center of strong secular trends.
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That equipment ACM Research sells helps to improve yields, i.e. reduce defects, in an industry with notoriously high costs. Equipment firms that can reduce defect rates are highly valuable as a result.
AI, IoT, electric vehicles, and the rapid and continuous proliferation of technology means that that equipment has a strong future. It’s vitally important that the chips in those products come from the highest yield manufacturing.
ACM Research is trending up at the moment following the release of its Q3 earnings. Revenues increased by 26% and the company shipped a record $213 million of products, up 31%. Beyond that, ACM Research remains a highly profitable firm overall with net income more than doubling to $59.65 million through the 9 months ended Sept. 30.
EVgo (EVGO)
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It’s easy to be blinded to the continued opportunity in stocks like EVgo (NASDAQ:EVGO) as overall EV demand shows signs of difficulty. Headlines can lead you to believe that EVs are dead and their recent growth is nothing more than a flash in the pan.
Those looking for evidence to the contrary need look no further than EVgo’s Q3 highlights. The company has done very, very well and crossed important thresholds recently. Most importantly, revenues are soaring and grew by 234% in Q3, reaching $35.1 million. EVgo also reversed course, finding operational profitability that led to $604,000 in profits. A year earlier EVgo reported a $3.2 million loss. Further, EVgo reduced its net loss by 45% which will continue to be an important factor in proving its worth overall.
EVGO stock is currently a great opportunity for investors looking for a green infrastructure investment that continues to show improving fundamentals.
Small-Cap Stocks: Strattec Security (STRT)
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Strattec Security (NASDAQ:STRT) is a producer of electro-mechanical locks and other security products and serves automotive manufacturers throughout North America. The company serves the big 3 American vehicle makers, Hyundai/Kia, and several other Tier 1 OEMs.
That raises the obvious question of whether it will be negatively affected by the UAW strikes. It doesn’t seem so. Those strikes were ongoing for the last two weeks of Strattec Security’s third quarter. Revenue growth was strong and net income improved significantly. Further, earnings beat estimates which signals strength overall even amidst the UAW backdrop.
UAW strikes ended Oct. 30 which means that the company was affected for the first month of Q4. Its shares held very steady during that period and there is little reason to believe it won’t continue to be strong. There is no negative news that I can find that suggests the UAW strikes should drastically impact the firm in Q4. Q3’s unexpectedly strong results tell the greater story here.
Sterling Infrastructure (STRL)
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Sterling Infrastructure (NASDAQ:STRL) has a lot of work to do…in a good way. The civil infrastructure firm has a massive backlog of orders to fill. That has allowed the company to increase its full year guidance and is a prime factor for investors to get behind the stock.
Its backlog reached $2.01 billion by Spet. 30, up 42% from the beginning of the calendar year. The combined backlog sat at an even higher $2.39 billion. Sterling Infrastructure was bolstered by the strong indicators, along with strong cash flows, and raised its 2023 guidance.
Basically, Sterling Infrastructure is setting up to grow rapidly in 2024. The company has a strong presence in the southeast, particularly in manufacturing and data center projects. $331 million in cash flows from operations, a resilient economy, and peak rates all suggest that STRL stock has strong momentum on its side heading into 2024.
Small-Cap Stocks: Intapp (INTA)
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Intapp (NASDAQ:INTA) is a cloud-based software firm with strong connections to leading firms and AI catalysts. It may be a lesser known stock overall but Intapp’s most recent earnings results speak to the notion of overall health.
At the highest level, revenue growth is strong and losses are narrowing. Cloud-based, AI-connected professional and financial services companies like Intapp remain highly intriguing. Their potential to drastically increase efficiency at the enterprise level shouldn’t be overlooked by investors. And Intapp is a good choice in that regard within the small cap space.
Revenues grew by 28% in Q1, reaching $101.6 million. Of that, SaaS and support revenues accounted for $74.1 million. Further, Intapp boasts $242.5 million in annual recurring Cloud revenue. That represents a 38% increase and will serve as a point of attraction for investors overall. Cloud and AI are hit topics and rightly so. Financial and professional services firms rely on the technology and its potential to provide efficiency gains is not to be overlooked.
CarParts.com (PRTS)
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CarParts.com (NASDAQ:PRTS) is something of a contrarian stock pick at this point. Share prices have declined steadily throughout 2023 but the analysts covering PRTS shares believe it has 100% upside.
The company, which provides car parts in the U.S. and the Philippines, continues to grow. The third quarter marked its 15th consecutive quarter of growth overall and sales reached a historical high. Investing in PRTS stock could be seen as controversial because it continues to incur small net losses despite revenues above $165 million.
Management noted a ‘softening consumer environment’ as one of the reasons for relatively weak demand. Maybe but at the same time, Americans are keeping their vehicles for longer than ever. Inevitably, those older vehicles will require more and more maintenance. That could easily be the key to CarParts.com finding consistent profitability in the near future.
It doesn’t hurt that the company has been able to poach executives from eCommerce giants in its efforts to rapidly improve the firm.
MicroStrategy (MSTR)
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MicroStrategy (NASDAQ:MSTR) is one of the most ardent Bitcoin (BTC-USD) supporters at the enterprise level.Former CEO and current executive chairman Michael Saylor is on a crusade for the leading cryptocurrency. His firm holds massive amounts of Bitcoin in its treasury. So, as Bitcoin goes so too goes the fortunes of MSTR stock.
MicroStrategy is a business intelligence firm mostly in name. While it did report $129.5 million in revenues in Q3, that’s not why investors care about the firm primarily. Instead, it’s the fact that MicroStrategy continues to amass huge Bitcoin reserves. IN Q2, the firm purchased an additional 6,067 BTC for $167 million, or an average purchase price of $27,531. Bitcoin currently sits above $36,400 and MicroStrategy owns $4.69 billion in Bitcoin at an average price of $29,586.
That’s looking more and more like a stronger investment as time goes on. MicroStrategy has been capable of buying Bitcoin at a lower price than it could sell them for.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
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