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Wall Street has been witnessing an impressive rally in 2023 after a highly disappointing 2022. Year to date, the three large-cap benchmarks — the Dow, the S&P 500 and the Nasdaq Composite — have climbed 5.4%, 17.4% and 34.9%, respectively. Aside from large-cap-centric indexes, the small-cap-specific benchmark — the Russell 2000 — has risen a mere 0.7%.
In 2022, small-cap companies suffered from a record-high inflation, a soaring interest rate and fear of an impending recession. However, this year, this segment of the economy found relief from these three concerns.
First, the inflation rate has been steadily dwindling since June 2022. A lower inflation rate has reduced the input costs for these companies. Small businesses have little option to shift higher input costs in their final products.
Second, since the beginning of 2023, the Fed has reduced the magnitude of interest rate hikes. The central bank has given enough indication that it is approaching the end of the ongoing rate hike cycle. Small businesses are highly dependent on easy access to cheap credit.
Third, a recently released series of key economic data has clearly indicated that the U.S. economy is cooling including the resilient labor market. However, better-than-expected consumer spending has reduced the risk of a near-term recession.
Small businesses are predominantly dependent on the domestic economy. They generally have very little access to export markets. Therefore, a U.S. recession could have been disastrous for them.
Our Top Picks
We have narrowed our search to five small-cap (market capital < $1 billion) stocks. These stocks have strong growth potential for the rest of 2023 and have seen positive earnings estimate revisions in the last 30 days. Finally, 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
HCI Group Inc. (HCI - Free Report) s engaged in diverse business activities, including property and casualty insurance, information technology, real estate and reinsurance. HCI, through its largest subsidiary, Homeowners Choice Property & Casualty Insurance Co. Inc., provides property and casualty insurance. HCI’s insurance product includes property and casualty homeowners’ insurance, condominium-owners' insurance and tenant’s insurance to individuals owning property.
HCI Group has expected revenue and earnings growth rates of 5.9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 46.2% over the last 30 days.
Limbach Holdings Inc. (LMB - Free Report) provides building systems solutions in the United States. LMB engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. LMB operates in two segments, namely, General Contractor Relationships and Owner Direct Relationships.
Limbach Holdings has expected revenue and earnings growth rates of 1.6% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 28.7% over the last seven days.
IRadimed Corp. (IRMD - Free Report) develops, manufactures, markets, and distributes magnetic resonance imaging (MRI) compatible medical devices, and related accessories and services in the United States and internationally. IRMDoffers MRidium MRI compatible intravenous (IV) infusion pump system with associated disposable IV tubing sets; and MRI compatible patient vital signs monitoring system.
IRMD provides non-magnetic IV poles, wireless remote displays/controls, side car pump modules, dose error reduction systems, and SpO2 monitoring with sensors and accessories. IRMD serves hospitals, acute care facilities, and outpatient imaging centers.
IRadimed has expected revenue and earnings growth rates of 22.5% and 36.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the last 30 days.
Graham Corp. (GHM - Free Report) designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters, and various types of heat exchangers. GHM markets to chemical, petrochemical, petroleum refining, and electric power generating industries, including cogeneration and geothermal plants.
Graham has expected revenue and earnings growth rates of 11.8% and 36.4%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last seven days.
Manitex International Inc. (MNTX - Free Report) provides engineered lifting solutions in the United States, Italy, Canada, France, Chile, and internationally. MNTX designs, manufactures, and distributes products that are used in various industries. MNTX also offers boom trucks, truck cranes, and sign crane products primarily for use in industrial projects, energy exploration, and infrastructure development comprising roads, bridges, and commercial construction, and truck-mounted aerial platforms.
In addition, MNTX manufactures and sells rough terrain cranes and material handling products, and truck mounted hydraulic knuckle boom cranes. MNTX sells its products through dealers and rental distribution channels.
Manitex International has expected revenue and earnings growth rates of 4.9% and 44%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 63.6% over the last 30 days.
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5 Small Hidden Gems for the Rest of 2023
Wall Street has been witnessing an impressive rally in 2023 after a highly disappointing 2022. Year to date, the three large-cap benchmarks — the Dow, the S&P 500 and the Nasdaq Composite — have climbed 5.4%, 17.4% and 34.9%, respectively. Aside from large-cap-centric indexes, the small-cap-specific benchmark — the Russell 2000 — has risen a mere 0.7%.
In 2022, small-cap companies suffered from a record-high inflation, a soaring interest rate and fear of an impending recession. However, this year, this segment of the economy found relief from these three concerns.
First, the inflation rate has been steadily dwindling since June 2022. A lower inflation rate has reduced the input costs for these companies. Small businesses have little option to shift higher input costs in their final products.
Second, since the beginning of 2023, the Fed has reduced the magnitude of interest rate hikes. The central bank has given enough indication that it is approaching the end of the ongoing rate hike cycle. Small businesses are highly dependent on easy access to cheap credit.
Third, a recently released series of key economic data has clearly indicated that the U.S. economy is cooling including the resilient labor market. However, better-than-expected consumer spending has reduced the risk of a near-term recession.
Small businesses are predominantly dependent on the domestic economy. They generally have very little access to export markets. Therefore, a U.S. recession could have been disastrous for them.
Our Top Picks
We have narrowed our search to five small-cap (market capital < $1 billion) stocks. These stocks have strong growth potential for the rest of 2023 and have seen positive earnings estimate revisions in the last 30 days. Finally, 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
HCI Group Inc. (HCI - Free Report) s engaged in diverse business activities, including property and casualty insurance, information technology, real estate and reinsurance. HCI, through its largest subsidiary, Homeowners Choice Property & Casualty Insurance Co. Inc., provides property and casualty insurance. HCI’s insurance product includes property and casualty homeowners’ insurance, condominium-owners' insurance and tenant’s insurance to individuals owning property.
HCI Group has expected revenue and earnings growth rates of 5.9% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 46.2% over the last 30 days.
Limbach Holdings Inc. (LMB - Free Report) provides building systems solutions in the United States. LMB engineers, constructs and services the mechanical, plumbing, air conditioning, heating, building automation, electrical and control systems. LMB operates in two segments, namely, General Contractor Relationships and Owner Direct Relationships.
Limbach Holdings has expected revenue and earnings growth rates of 1.6% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 28.7% over the last seven days.
IRadimed Corp. (IRMD - Free Report) develops, manufactures, markets, and distributes magnetic resonance imaging (MRI) compatible medical devices, and related accessories and services in the United States and internationally. IRMDoffers MRidium MRI compatible intravenous (IV) infusion pump system with associated disposable IV tubing sets; and MRI compatible patient vital signs monitoring system.
IRMD provides non-magnetic IV poles, wireless remote displays/controls, side car pump modules, dose error reduction systems, and SpO2 monitoring with sensors and accessories. IRMD serves hospitals, acute care facilities, and outpatient imaging centers.
IRadimed has expected revenue and earnings growth rates of 22.5% and 36.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the last 30 days.
Graham Corp. (GHM - Free Report) designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters, and various types of heat exchangers. GHM markets to chemical, petrochemical, petroleum refining, and electric power generating industries, including cogeneration and geothermal plants.
Graham has expected revenue and earnings growth rates of 11.8% and 36.4%, respectively, for the current year (ending March 2024). The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last seven days.
Manitex International Inc. (MNTX - Free Report) provides engineered lifting solutions in the United States, Italy, Canada, France, Chile, and internationally. MNTX designs, manufactures, and distributes products that are used in various industries. MNTX also offers boom trucks, truck cranes, and sign crane products primarily for use in industrial projects, energy exploration, and infrastructure development comprising roads, bridges, and commercial construction, and truck-mounted aerial platforms.
In addition, MNTX manufactures and sells rough terrain cranes and material handling products, and truck mounted hydraulic knuckle boom cranes. MNTX sells its products through dealers and rental distribution channels.
Manitex International has expected revenue and earnings growth rates of 4.9% and 44%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 63.6% over the last 30 days.