But small-cap stocks bore the brunt of Jerome Powell’s interest rate hikes, with the S&P 600 Small Cap ETF (NYSEARCA:SPSM) staying fairly flat over the past year. The S&P 500 is up nearly 15% over the same period.
But that’s about to change. Many of these companies offer massive upside potential due to their long-term prospects and current undervaluation. If you want to build a small-cap portfolio for your New Year resolutions, starting with these seven stocks is a great way to start.
AST SpaceMobile (ASTS)
AST SpaceMobile (NASDAQ:ASTS) has led small-cap stocks over the past month. The stock’s meteoric rise hit nearly 30% since the beginning of November, but there’s still time to jump aboard before the company goes truly stratospheric. The company, whose backers include telecom giant AT&T (NYSE:T) is working to develop satellite-to-smartphone connectivity capabilities to aid communication in remote and rural areas. But, whereas Starlink seeks to serve customers with the Internet, ASTS focuses solely on broadband call connectivity.
This makes ASTS unique, as no other company targets this niche market. As proof of AST SpaceMobile’s unique position, the company’s recent satellite-enabled 5G voice call from Hawaii to Spain is the first call of its type ever. Although the world is increasingly digital, there’s still a real gap in cell connectivity that’s only been served by pricy satellite phones thus far – not a standard 5G-enabled smartphone.
On the heels of the company’s successful test pilot, AST SpaceMobile plans to launch its first commercial offerings via SpaceX flight in 2024’s first quarter. While that planned launch is mostly baked into ASTS’ current per-share price, a successful launch will still provide this top small-cap stock a hefty boost. From there, as the company increases its satellite reach, we’ll likely see AST SpaceMobile shares go to the moon.
Small-Cap Stocks to Buy: Lemonade (LMND)
Lemonade (NYSE:LMND) is an artificial intelligence stock but a far cry from the typical AI stock’s lofty (and often unrealistic) ambition. Instead, Lemonade is a fintech-focused stock using AI to streamline laborious insurance processes and help a range of customers previously ignored by traditional insurers.
Lemonade’s core offering is Maya, an AI-powered chatbot that walks customers through the lengthy and previously tedious process of determining which insurance products best serve their needs at a price point friendly to both the insured and practical from a profit standpoint. Beneath the surface, Lemonade’s data aggregating and analytical AIs leverage reams of customer and market data to inform Maya’s determinations. As Lemonade’s popularity grows, the company’s AI and analytics will further optimize themselves to deliver the best product possible to clients.
Over the past year, Lemonade’s customer count grew 12% while revenue climbed 55% year-over-year. Insurance and reinsurance is a notoriously difficult market to break into, but Lemonade is a small-cap stock ready to compete with big-cap players like Allstate (NYSE:ALL) and Progressive (NYSE:PGR).
Enovix Corporation (ENVX)
Enovix Corporation (NASDAQ:ENVX) is a small-cap stock on the cutting edge of battery tech. Whereas big-name battery producers like Tesla (NASDAQ:TSLA) made waves this year as they pivoted their lithium-ion batteries away from rare earth materials while retaining the same basic battery structure, Enovix is restructuring the entire concept.
The company makes 3D silicone lithium-ion batteries, which are inherently more scalable and useful for high-capacity applications like smartphones and tech wearables. The latter point is evidenced by Enovix’s two wins in 2023. First, the company locked FDA approval for battery inclusion within vital sign monitors (think blood pressure, heart rate, and similar stat monitors). Second, Enovix secured a major US Army contract to implement its batteries in next-gen military wearables and bring 21st-century tech into soldiers’ toolkits.
Enovix is still an R&D-centric small-cap stock, but big wins like this point to rapid acceleration as the company brings its batteries to market.
Small-Cap Stocks to Buy: Aspen Aerogels (ASPN)
Heat and energy retention are on many consumers’ minds as the Inflation Reduction Act authorized tax credits for at-home energy-friendly insulation efficiencies. Aspen Aerogels (NYSE:ASPN) is riding that sustainable stock wave but at a much larger industrial scale. The company produces aerogel-based products used in high-heat facilities like oil refineries and massive power plants. The industry-wide use proves Aspen is a critical part of sustainable initiatives in high-risk, high-heat facilities, though the small-cap stock goes overlooked by most retail investors.
Shares have remained beaten down since 2022, losing about 10%, although recent news pushed its per-share price higher. The company remains unprofitable, but its recent earnings beat analyst expectations and created bullish tailwinds. Though net income posted a loss, the most recent quarter marked the third successive window in which gross profit increased and total revenue jumped. As the company extends its market reach and improves its margins, this small-cap stock will likely see investor interest spiking in 2024.
Jumia Technologies (JMIA)
Africa’s eCommerce retail solutions are increasing exponentially, and Jumia Technologies (NYSE:JMIA) is one of the few small-cap stocks positioned to capture part of a $20 billion market. Jumia is unique on this list of small-cap stocks to buy because, just a few years ago, investors were piling into the stock known as the “Amazon (NASDAQ:AMZN) of Africa.” Shares are down massively from their 2021 high of $60+, and Jumia trades at less than $4 today. Still, though initial estimates were overblown, there’s still upside potential for this small-cap stock.
As macroeconomic headwinds slacken and fall, eCommerce will likely see a resurgence globally, but particularly in emerging markets like Africa that are more sensitive to those conditions than developed nations. Already signs point to that thesis bearing fruit, as the company’s most recent earnings loss is the smallest it’s seen since it hit stock exchanges in 2019. The company has already made it through the worst of the financial mini-crisis and is one of the few operations like it on the African continent – making it a truly unique small-cap play that captures international markets.
Small-Cap Stocks to Buy: Planet Labs (PL)
High-tech satellite solutions are everywhere today. We already covered global connectivity opportunities in AST SpaceMobile, but Planet Labs (NYSE:PL) offers a massive array of geospatial tools for industry. Climate monitoring, agricultural optimization, zone and development planning, and more are all streamlined through geospatial imagery analysis. Planet Labs is one of the few non-military venues that corporations and individuals can leverage to access hi-res imagery when Google’s (NASDAQ:GOOG, NASDAQ:GOOGL) Earth and Map tools don’t cut it.
Like other stocks on this small-cap list, PL’s revenue prospects are improving while losses narrow. The company posted an 11% revenue jump this quarter, while its net loss fell by nearly $10 million in the first half of fiscal year 2024. Likewise, the company is adapting to the higher interest rate regime and cutting costs across the board to improve operational alignment and margins. If Planet Labs can keep its momentum, it deserves a top spot in your small-cap space stock portfolio.
ClearPoint Neuro (CLPT)
It’s hard to beat tech and healthcare for a long-term small-cap play. Clearpoint Neuro (NASDAQ:CLPT) combines the best of the two into one of the top small-cap stocks to buy today. The company uses robotics to execute minimally invasive surgical procedures, including neurosurgery and biopsies. Surgeons are increasingly dependent upon robotics and automation in medicine, and ClearPoint represents the cutting edge of that trend.
ClearPoint’s stock tanked this year on the heels of increased losses, but remember HealthTech is a pricy endeavor with massive R&D costs. Since ClearPoint is a new entrant in the field, losses are expected and investors shouldn’t expect a multibagger in the next few years. In the long term, though, ClearPoint could be one of the biggest moneymakers in your small-cap portfolio. Per-share pricing is at its lowest in a year, but don’t expect the company to trade in penny stock territory for long.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.