Are you eyeing small cap stocks to buy in 2024? Wondering why these market minnows deserve a spot in your investment portfolio? This article will highlight the world of small cap investments, uncovering the 6 best small cap stocks you should invest in 2024 and how they could be your key to financial success this year and beyond.
As you look into investing in 2024, you might be thinking about big names like Apple, Google, and Amazon. But have you considered the hidden gems of the market? This year, it’s worth looking at small cap stocks.
These smaller companies might not be as famous, but they can add variety to your investments and have the chance to grow quickly. Sure, they come with more ups and downs, but they could be a smart addition to your portfolio.
Let’s explore the 6 best small cap stocks to buy in 2024 and why these lesser-known stocks might be a good pick for you this year.
What are Small Cap Stocks?
Small cap stocks are shares of companies that have a market value falling within a specific range, typically between $250 million and $2 billion, although this range may vary. The term “cap” stands for market capitalization, which is calculated by multiplying the current stock price of a company by the total number of its outstanding shares.
It’s important to note that what qualifies as “small” in the context of stocks is somewhat subjective. Different stock market indexes use varying criteria to define small-cap stocks.
For instance, the Russell 2000 Index is a well-known benchmark for small cap stocks, and it includes companies with market capitalizations that currently range from about $240 million to $6 billion.
Additionally, there are other major stock market indexes like the Standard & Poor’s SmallCap 600 and the MSCI USA Small Cap Index, which include U.S. companies with an even wider range of market capitalizations.
What are the 6 Best Small Cap Stocks to Buy in 2024?
The list below highlights some of what I think might be the best small cap stocks to buy in 2024. These companies have demonstrated impressive returns in the previous year and exhibit strong growth potential in the future.
All of them have achieved gains exceeding 100% since the beginning of the year. It’s worth noting that these companies are relatively modest in size, with none exceeding a market capitalization of $10 billion, and some even smaller than $1 billion.
Investing in smaller cap stocks comes with its own set of risks, as these companies may not be as financially robust as larger, well-established blue-chip companies. Additionally, there is a chance that the positive momentum and enthusiasm seen in the previous year could diminish in the new year, especially if there are economic challenges or specific issues affecting these stocks.
However, it’s important to acknowledge that the following seven companies each offer unique value propositions and growth prospects, making them worthy candidates for consideration if you are seeking promising small cap stocks to add to your portfolio in 2024. To level out your portfolio you might also consider investing in ETFs to offset the risk.
1. Bitfarms Ltd. (BITF)
The first small cap stock on our list is the Bitfarms Ltd. (BITF). With a market capitalization of approximately $731 million, Bitfarms has been making waves in the finance sector, showcasing remarkable performance with a staggering 415.9% increase in 2023.
What sets Bitfarms apart is its intriguing connection to the recent surge in Bitcoin’s value. Although headquartered in Toronto, this cryptocurrency mining company operates its server farms in cost-effective locations like Paraguay and Argentina. What makes it particularly appealing is that it’s one of the more affordable options on our list, with shares trading at around $2 each. This makes it an accessible choice, even for small-scale investors.
But what really catches your eye is that Bitfarms managed to outperform Bitcoin by more than two-fold in 2023, despite Bitcoin itself delivering an impressive 150% return. Bitfarms achieved this remarkable feat by diversifying its operations into other digital assets, further expanding its potential for growth.
So, if you’re considering riding the wave of the cryptocurrency craze in 2024, Bitfarms (BITF) is a captivating and small yet compelling stock that you might want to keep on your radar. Its remarkable performance and strategic diversification make it a potentially exciting addition to your investment portfolio.
2. Applied Optoelectronics Inc. (AAOI)
Now, let’s take a closer look at Applied Optoelectronics Inc. (AAOI), a technology company with a market capitalization of approximately $692 million. In 2023, this tech marvel delivered an astonishing performance, with its stock price surging by a remarkable 882%.
Applied Optoelectronics specializes in manufacturing fiber optic equipment, lasers, and cutting-edge high-tech gear. Although it might be considered a small and niche player, it’s precisely this niche focus that allows the company to excel. This pinpoint concentration on its unique business line enables Applied Optoelectronics to seize opportunities and maximize its potential.
Why should you keep an eye on AAOI in 2024? Well, it’s all about the ongoing 5G revolution in wireless networks across America. With intense competition among major telecom carriers, the stage is set for a significant year in the world of fiber optics. This is where Applied Optoelectronics steps in, as it’s well-positioned to benefit from the burgeoning demand for fiber optic technology.
It’s important to note that AAOI’s stock has experienced some volatility in the past. However, recent strong forward guidance and a solid performance track record have propelled its shares to new 52-week highs. This impressive run over the previous year, coupled with the promising outlook for the 5G build-out, makes Applied Optoelectronics (AAOI) an engaging and intriguing option for you to consider in your investment journey.
3. Carrols Restaurant Group Inc. (TAST)
Now, let’s shine a spotlight on Carrols Restaurant Group Inc. (TAST), which holds a market capitalization of around $435 million. Carrols has been serving up impressive performance, boasting a remarkable 491.9% growth rate in 2023.
While you might not be familiar with the corporate parent, you’ve likely dined at one of their numerous franchised locations. Carrols Restaurant Group operates a sprawling network of over 10,000 restaurants bearing famous nameplates such as Burger King and Popeyes.
In the past, the company faced its share of challenges, with persistent net losses and high expenses in 2019 leaving it vulnerable to the pandemic-related disruptions of 2020 and 2021. However, in the current year, TAST stock has been staging an impressive comeback, reclaiming profitability.
This turnaround story has captured the attention of investors, leading to a surge in the stock’s value. As we enter 2024, Carrols Restaurant Group is trading near its 52-week high, signaling renewed confidence in its prospects.
So, if you’re on the lookout for the best small cap stocks to buy in 2024, Carrols Restaurant Group Inc. (TAST) certainly merits your attention. Carrols Restaurant Group Inc. (TAST) has bounced back to profitability, and it’s heading in a very positive direction. This makes it a strong choice for you to think about when considering your investments.
4. Duolingo Inc. (DUOL)
The next small cap stock worth considering for investment in 2024 is Duolingo Inc. (DUOL). With a substantial market capitalization of around $9.3 billion and an impressive 2023 performance, where it posted a growth rate of 203.9%, Duolingo stands out as a compelling option for your investment portfolio in 2024.
Duolingo has become a household name in the world of language-learning software, offering courses in an impressive array of 40 different languages. However, it’s not limited to just catering to international travelers; Duolingo has strategically diversified by introducing a digital language proficiency assessment exam, which has become a key driver of its growth.
What truly sets Duolingo apart is its financial stability. Unlike some riskier small cap tech stocks, Duolingo not only operates profitably but also maintains a substantial cash reserve of approximately $700 million. This financial cushion ensures that the company can weather any short-term disruptions confidently.
Adding to its allure is DUOL’s stock price, which has been consistently climbing and is currently within reach of yet another 52-week high. Considering these impressive factors, Duolingo (DUOL) emerges as one of the prime contenders among the best small cap stocks to consider for your investment portfolio in 2024.
5. Carvana Co. (CVNA)
Carvana Co. (CVNA) is another noteworthy small cap stock that deserves your attention. It has a market capitalization of approximately $6.8 billion and showed an impressive performance in 2023. With its stock surged by a remarkable 740.3%, Carvana has certainly made a name for itself in the world of innovative car dealerships.
Carvana is not your typical car dealership; it’s an innovative player in the industry. Its shares have seen an extraordinary sevenfold increase in value throughout 2023, making it one of the standout performers among small cap stocks. However, it’s important to note that CVNA’s journey has been far from smooth, marked by notable volatility and concerns about the company’s long-term viability.
Nevertheless, Carvana has taken significant steps to address these challenges. It has restructured its debt and conducted a secondary stock offering to bolster its cash reserves. This has not only improved its financial standing but has also reignited investor confidence.
Still, there are hurdles ahead for Carvana, including the pressure to meet growth expectations and manage its ongoing cash burn as it strives to achieve consistent profitability. If you’re an ambitious investor, CVNA is a stock that you might want to take a closer look at, especially considering its strong momentum as it enters 2024.
However, it’s crucial to approach it with a clear understanding of the potential risks and rewards associated with this dynamic and rapidly evolving company.
6. Simpson Manufacturing Co. Inc. (SSD)
The last intriguing small cap stock on our list that should pique your interest is Simpson Manufacturing Co. Inc. (SSD). It is a company operating in the materials sector with a market capitalization of approximately $7.7 billion. While it may not always grab the headlines, Simpson stands out as a reliable and valuable stock option, offering consistent performance. In 2023, it delivered a solid performance with a growth rate of 106.9%.
Simpson’s business revolves around wood, concrete, and construction products, which may not sound exciting but has proven to be a lucrative niche. If you’ve been to a hardware store recently, you’re likely aware of the soaring prices for materials like lumber. This surge in material prices has significantly boosted Simpson’s profit margins.
One of the key factors contributing to its success is the company’s ability to maintain steady revenue from year to year. This stability has set the stage for an expected 10% increase in earnings for 2023.
Moreover, the housing market in the U.S. continues to show resilience, with housing “starts” remaining stronger than anticipated. While they may not match the levels seen in previous low-interest-rate years, this suggests that Simpson Manufacturing is well-positioned to continue delivering solid results in 2024.
If you’re looking for a dependable investment option with a track record of delivering even when it doesn’t grab the headlines, Simpson Manufacturing (SSD) is a stock worth considering for your portfolio. Its steady performance and the favorable market conditions in the construction industry indicate the potential for continued success this year.
Final Thoughts
In wrapping things up, when you’re thinking about where to invest your money in 2024, these small cap stocks could be worth your attention. We’ve talked about a bunch of different companies from various industries, and they all have their unique strengths.
But remember, small cap stocks can be a bit more unpredictable, so it’s essential to do your homework and understand the risks. Before considering which small cap stocks to buy in 2024, think about how much risk you’re comfortable with and consider spreading your investments to minimize the ups and downs.
Finally, don’t hesitate to chat with a financial advisor or expert for personalized guidance. When it comes to investing, knowledge is power, and making informed choices is your best strategy for a successful 2024.
