5 Top Small-Caps to Track in Volatile Markets

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Market volatility is back, and in a big way. The double whammy of a potential trade war and the ongoing Facebook scandal are making investors jittery. The S&P 500 and Nasdaq both posted steep losses of more than 2% each, while the Dow Jones dropped more than 400 points into correction territory. That made it the worst week for the Dow since January 2016.

So what should investors do now? According to the Street, while these losses may be unsettling, investors shouldn’t panic. The market is still in normal correction territory. However, some stocks may be better suited to volatility than others. And one of these groups is small cap stocks.

“We maintain our tactically bullish stance on small-caps over large-caps given the accelerating economic and corporate profit outlook,” writes Bank of America equity strategist Dan Suzuki. “The near-term risks appear firmly to the upside.”

In fact, Suzuki notes that small-caps have outperformed their larger peers since early February.

These stocks are a better bet right now says Suzuki because: 1) thinly-traded small-caps are less vulnerable to sharp price movements; 2) the new tax law has a disproportionately positive impact on small-caps; and 3) small cap companies tend to be domestically focused and are therefore less exposed to trade war damages.

“Small-caps have a much smaller revenue coming from overseas, so they are much less affected by tariffs than the multinationals,” Sean O’Hara, president of Pacer ETFs, explained to CNBC recently.

How to find ‘Strong Buy’ small cap stocks

Bearing this in mind, we turned to TipRanks’ powerful stock screener to pinpoint some interesting small-cap ideas that are worth tracking right now. In just a couple of clicks you can pull up small cap stocks with a ‘Strong Buy’ analyst consensus rating from the Street’s best-performing analysts. These are the analysts who consistently outperform the market- and their peers. You can also set other filters including news sentiment, blogger sentiment or hedge fund sentiment to find the best stocks for your strategy.

We crunched the data, and found these five small cap stocks, all with 100% buy ratings from top analysts right now. Note that you can click on the screenshots for further insights into a specific stock or analyst.

Let’s take a closer look now:

1. Xcerra (NASDAQ:XCRA)

Semiconductor testing company XCRA has 100% Street support right now, with four back-to-back buy ratings from top analysts in the last three months. TipRanks’ no. 1 analyst B.Riley FBR’s Craig Ellis has just resumed coverage of Xcerra with a Buy rating and a confident $15 price target (31% upside potential).

“Our positive thesis is led by the industry’s favorable multiyear semiconductor unit growth backdrop; recent and expected product execution strength in testers, contactors, and handlers; and a potentially significant cash redeployment optionality” cheered Ellis on March 21.

2. Instructure (NYSE:INST)

Shares in Instructure, a Utah-based education tech company, are up over 27% year-to-date. And the Street sees further growth ahead. Five top analysts have published recent INST buy ratings with a $46.60 average price target (11% upside potential).

Indeed, SunTrust analyst Terry Tillman says ‘multiple product catalysts’ and expansion possibilities place INST on track for 30% plus revenue growth over a multiyear period. He raised his price target to $47 from $42 following ‘solid’ Q4 results. He is ranked as a top #50 analyst on TipRanks.

3. Heron Therapeutics (NASDAQ:HRTX)

This innovative biopharma has upside potential of over 36% according to the Street. And in the last six months, Heron has received only buy ratings from analysts and top analysts. The company specializes in post-surgical pain management and drug delivery.

In particular HTX-011 could be “game changer” says Needham’s Serge Belanger. Following strong clinical data and safety profile, the drug’s NDA (new drug application) filing is due in the second half of this year. “Given the fast-track designation of HTX-011, we expect a potential approval in mid-2019” writes five-star Mizuho Securities analyst Difei Yang.

4. Smart Global Holdings (NASDAQ:SGH)

SGH is a global leader in specialty memory, storage and hybrid solutions for the electronics industry. Six top analysts have published buy ratings on SGH in the last week following a ‘significant beat and raise quarter’. Their average price target of close to $60 translates into 22% upside potential.

The company’s Brazilian business continues to shine according to Needham’s Rajvindra Gill. “We believe that the majority of SGH’s product wins are sticky with specialty memory product cycles of 5-8 years” adds Gill. He sees the stock spiking over 50% to hit $75 (up from his previous target of $46).

5. Orthofix (NASDAQ:OFIX)

After a year of improved growth, medical device maker Orthofix is now turning to the all-important task of margin expansion. “OFIX continues to make improvements to its profitability profile that will benefit longer-term. Beyond the EBITDA margin expansion initiatives that we’ve noted previously, OFIX announced plans to redomicile within the US to take advantage of US tax reform” explains BTIG’s Ryan Zimmerman.

Overall, OFIX has received three recent buy ratings with a $66 average analyst price target (13% upside potential).