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Top 6 Small Hidden Gems That Have Surged in the Past Month

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·6 min read
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Volatility has showed up again on Wall Street after an impressive rally in the first eight months of the year. Month to date, the three major large-cap-centric indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in negative territory. The small-cap-specific indexes — the Russell 2000 and the S&P 600 — have dropped 1.7% and 2.4%, respectively, month to date.

While market participants are predominantly concerned about the performance of large-cap stocks, several small-cap stocks have surged in the past month defying market volatility. A handful of these stocks sport a Zacks Rank #1 (Strong Buy) with solid upside left. At this stage, investment in these stocks should be prudent in the near future.

Small Business Optimism Rebounds in August

On Sep 14, the National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index rose 0.4 points in August to reach 100.1 from 99.7 in July. Market participants were expecting this index to pullback to 99 on average. Five out of 10 sub-components of the index rose last month while four fell and one remained unchanged with the previous month.

The faster-than-expected reopening of the U.S. economy buoyed by the nationwide deployment of COVID-19 vaccines and massive pent-up demand for both intermediary and final products ramped up small business activities.

However, a shortage of skilled manpower and prolonged disturbance in the supply-chain system took a tool on small business operators. The percentage of firms with unfilled job openings increased by one point to a record high 50%. The percentage of firms planning to hire more manpower advanced five points to a record-high 32%.

Importance of Small Businesses

Small businesses create a significant number of jobs in the U.S. economy. More than 50% of the newly created jobs in the private sector originate here. These people constitute a large part of customers for big businesses.
Moreover, small companies are a major part of the supply chain management systems of large companies for innovative and technologically superior inputs. Additionally, small businesses more often than not form a vital cog in corporate America's customer base.

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. Consequently, the reopening of the economy immensely benefitted small businesses.

Moreover, the Fed is unlikely to hike the benchmark interest rate from its current range of 0-0.25% before late 2023. Small businesses depend extensively on easy access to credit at a cheap rate in order to expand their operations. Therefore, the central bank’s decision to pursue easy monetary policies will significantly benefit small businesses.

Our Top Picks

We have narrowed down our search to six small business (market capital < 1 billion) operators that have surged in the past month with more upside left for the rest of 2021. These stocks have seen positive earnings estimate revisions within the last 60 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 in the past month.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Goodrich Petroleum Corp. GDP is an independent oil and natural gas company that is engaged in the exploration, development and production of oil and natural gas properties in the United States.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 2.2% over the last 30 days. The stock price has soared 44.2% in the past month.

Eagle Bulk Shipping Inc. EGLE is engaged in the ocean transportation of dry bulk cargoes worldwide. It owns, charters, and operates dry bulk vessels that transport a range of bulk cargoes, including iron ore, coal, grains, fertilizers, steel products, petcoke, cement and forest products.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 27.8% over the last 60 days. The stock price has jumped 21% in the past month.

Build-A-Bear Workshop Inc. BBW operates as a multi-channel retailer of plush animals and related products. It operates through three segments: Direct-to-Consumer, International Franchising, and Commercial.

The company has an expected earnings growth rate of more than 100% for the current year (ending January 2022). The Zacks Consensus Estimate for current-year earnings improved 73.1% over the last 30 days. The stock price has climbed 20.7% in the past month.

Genco Shipping & Trading Ltd. GNK is engaged in the ocean transportation of dry bulk cargoes worldwide. The company, through the ownership and operation of dry bulk carrier vessels, transports iron ore, coal, grains, steel products, and other dry-bulk cargoes.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.7% over the last 7 days. The stock price has rallied 20.4% in the past month.

Bluegreen Vacations Holding Corp. BVH operates as a vacation ownership company. It markets and sells vacation ownership interests and manages resorts in leisure and urban destinations, including Orlando, Las Vegas, Myrtle Beach, Charleston and New Orleans, and others.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 91.5% over the last 60 days. The stock price has appreciated 20% in the past month.

Alpha and Omega Semiconductor Ltd. AOSL designs, develops, and supplies power semiconductor products for computing, consumer electronics, communication, and industrial applications in Hong Kong, China, South Korea, the United States, and internationally.

The company has an expected earnings growth rate of 16.4% for the current year (ending June 2022). The Zacks Consensus Estimate for current-year earnings improved 19.2% over the last 60 days. The stock price has advanced 10.3% in the past month.


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Genco Shipping & Trading Limited (GNK) : Free Stock Analysis Report

BuildABear Workshop, Inc. (BBW) : Free Stock Analysis Report

Eagle Bulk Shipping Inc. (EGLE) : Free Stock Analysis Report

Alpha and Omega Semiconductor Limited (AOSL) : Free Stock Analysis Report

Goodrich Petroleum Corporation (GDP) : Free Stock Analysis Report

Bluegreen Vacations Holding Corporation (BVH) : Free Stock Analysis Report

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