Wall Street is resembling its historically fluctuating trade in October after a tumultuous September. While market participants are predominantly concerned about the performance of large-cap stocks, it was the small-cap segment that suffered the least in September’s mayhem.

In September, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — plunged 4.3%, 4.8% and 5.3%, respectively. The mid-cap-centric S&P 400 plummeted 4.1%. However, the small-cap-specific Russell 2000 and the S&P 600 slid only 3.1% and 2.6%, respectively.

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. These stocks have provided double-digit returns in the past month while the market’s benchmark the S&P 500 Index fell 4%. At this stage, investment in these stocks should be prudent in the near future.

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.

Future Catalysts

As new cases of the highly-infectious Delta variant of coronavirus subdued last month, the reopening-oriented small-businesses are likely to benefit more. Per CDC, in the United States, 7-day average new cases came in at 97,909 as of Oct 4, compared with 160,284 a month ago. Nationwide vaccination drives also resulted in faster-than-expected reopening.

Both business spending and consumer spending remain firm in the third quarter of 2021. Massive pent-up demand for both intermediary and final products ramped up small business activities. Holiday season sales in the fourth quarter are likely to boost small businesses.

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. However, a shortage of skilled manpower and prolonged disturbance in the supply-chain system took a tool on small business operators.

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 five picks in the past month.

Image Source: Zacks Investment Research

SilverBow Resources Inc. (SBOW Quick QuoteSBOW - Free Report) is engaged in the exploration, development and production of oil and natural gas properties. Its primary projects include the Eagle Ford wells, Burr Ferry, South Bearhead Creek and Lake Washington fields. SilverBow Resources Inc.

The company has an expected earnings growth rate of more than 100% for fourth-quarter 2021. The Zacks Consensus Estimate for its fourth-quarter earnings improved 8.5% over the last 30 days. The stock price has soared 25.7% in the past month.

Condor Hospitality Trust Inc. is a self-administered real estate investment trust. it specializes in the investment and ownership of upper midscale and upscale, premium-branded select-service, extended stay and limited-service hotels.

The company has an expected earnings growth rate of more than 100% for fourth-quarter 2021. The Zacks Consensus Estimate for its fourth-quarter earnings improved 66.7% over the last 60 days. The stock price has jumped 22.3% in the past month.

Ramaco Resources Inc. (METC Quick QuoteMETC - Free Report) is an operator and developer of metallurgical coal primarily in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. It operates principally in Charleston, West Virginia.

The company has an expected earnings growth rate of more than 100% for fourth-quarter 2021. The Zacks Consensus Estimate for its fourth-quarter earnings improved 66.7% over the last 60 days. The stock price has climbed 21.3% in the past month.

Clearfield Inc. (CLFD Quick QuoteCLFD - Free Report) manufactures, markets and sells standard and custom passive connectivity products to the fiber-to-the-premises, enterprises and original equipment manufacturers markets in the United States and internationally.

The company has expected earnings growth of 43.5% for the quarter ending Dec 31. The Zacks Consensus Estimate for the quarter ending Dec 31 improved by 10% over the last 7 days. The stock price has surged 11.2% in the past month.

Alpha and Omega Semiconductor Ltd. (AOSL Quick QuoteAOSL - Free Report) 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 expected earnings growth of 29.2% for the quarter ending Dec 31. The Zacks Consensus Estimate for the quarter ending Dec 31 improved by 18.3% over the last 60 days. The stock price has advanced 10.7% in the past month.