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4 Small-Cap Stocks That Are Ready to Explode in 2021

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Wall Street has been enjoying a series of record highs lately with small-cap stocks leading the way higher. This is especially true as the Russell 2000 Index is up more than 20% in 2020, outperforming the gains of nearly 12% for the S&P 400 Mid Cap Index and about 15% for the S&P 500 Index.

Most of the gains were driven by the vaccine rollout, which will lead to the end of the pandemic and a swift economic recovery. As small-cap companies are closely tied to the U.S. economy, these are poised to outperform when the economy improves.

The wider reach of coronavirus vaccine will help the world's economy bounce back in 2021, compelling the agencies to lift the growth outlook. The Organization for Economic Co-operation and Development has raised the global GDP forecast to 5.2% from 4.9% for next year after an estimated 4% decline in 2020. Fitch has lifted the 2021 global growth forecast to 5.3% from 5.2% with stronger growth in the second half. The Federal Reserve revised its GDP growth forecast to 4.2% from 4%.

Additionally, the super-easy monetary policy has been driving the small-cap rally. Fed Chairman Jerome Powell pledged to hold rates near zero and will continue the asset purchase program at the current rate until “substantial further progress” has been made toward reaching maximum employment and healthy inflation. A low interest rate bodes well for small-cap stocks as it pushes up economic activities and results in higher spending, thus boosting domestically focused companies.

Increased optimism on further fiscal stimulus added to the strength. President Trump finally signed the new coronavirus relief package of $900 billion, which includes a round of $600 direct payments, extends two federal unemployment programs, funding for the Paycheck Protection Program, and a $300 per week unemployment compensation supplement.

As the economy seems on track for strong growth, a small-cap rally is expected to explode in 2021. As such, we have presented four stocks from the space that looks to outperform in 2021 given their superior fundamentals. These stocks have a Zacks Rank #1 (Strong Buy), Growth Score of A, double-digit earnings growth for next year, and belongs to the top Zacks Industry Rank (in the top 25%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Titan Machinery Inc. (TITN - Free Report)

This North Dakota-based company owns and operates a network of full-service agricultural and construction equipment stores. It has an estimated earnings growth of 20.29% for fiscal year (ending Jan 2022) and belongs to the top-ranked Zacks industry (top 6%). The stock has a market cap of $427.3 million.

Bassett Furniture Industries Incorporated (BSET - Free Report)

With a market cap of $198.6 million, this Virginia-based company is a leading manufacturer and marketer of high-quality, mid-priced home furnishings. The stock has an estimated earnings growth of 413.6% for fiscal year (ending Nov 2021) and belongs to the top-ranked Zacks industry (top 8%).

Haverty Furniture Companies Inc. (HVT - Free Report)

This Georgia-based company operates as a specialty retailer of residential furniture and accessories in the United States. It has an estimated earnings growth of 19.7% for next year and has a market cap of $516.7 million. Haverty Furniture belongs to a solid industry, which is placed at the top 11% in terms of ranking among more than 250 Zacks industries.

MarineMax Inc. (HZO - Free Report)

This Florida-based company is the nation's largest recreational boat and yacht retailer. It has estimated earnings growth of 12% for fiscal year (ending Sep 2021) and belongs to the top-ranked Zacks industry (top 12%). The stock has a market cap of $834.5 million.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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