Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

5 Underperforming Small-Cap Stocks Ready To Explode In 2020

By Zacks Investment ResearchStock MarketsDec 26, 2019 08:54PM ET
www.investing.com/analysis/5-underperforming-smallcap-stocks-ready-to-explode-in-2020-200495083
5 Underperforming Small-Cap Stocks Ready To Explode In 2020
By Zacks Investment Research   |  Dec 26, 2019 08:54PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The U.S. equity markets have performed well so far in 2019, making investors optimistic about a record-high close to the year on positive developments in U.S.-China trade relations and strong economic activity. Events like the Federal Reserve’s decision to cut rates thrice this year, easing of the U.S.-China trade war and Brexit worries, and strong economic growth in the first three quarters of 2019 have been catalysts.

Excluding a few setbacks, the three major stock indexes, the Dow, the S&P 500 and the Nasdaq Composite, witnessed strong momentum throughout the year. These indices have gained 23%, 27.2% and 27.5%, respectively, this year (through Dec 26, 2019). Additionally, the S&P 600 Small-cap Index (SP600) has gained 19.2% year to date.

2019 Growth Catalysts

After a two-year tussle, in December, the two largest economies agreed to sign the phase-one trade deal in January 2020 to end the tariff war, which hurt the global economy. U.S.-China trade tensions wreaked havoc on small-cap earnings this year by increasing costs. Thus, the easing of trade tensions bodes well for small-cap stocks.

The latest economic data points to 2.1% annual growth in the U.S. GDP rate in third quarter of 2019, better than analysts’ expectations. This marks 11 years of continuous economic growth — the longest growth span ever. This has been well-supported by soaring job growth and low unemployment rate for 21 consecutive months. Further, a rebound in factory production, robust domestic homebuilding market, and increase in consumer spending provided enough fodder for overall economic growth.

A dovish monetary stance taken by the Fed has also inspired optimism for economic growth. After three rate cuts in 2019 — July, September and October — the Fed indicated that it will not hike rates in 2020. Lower rates should prove beneficial for small-sized companies, perking up economic activities and resulting in higher spending, thereby boosting domestically focused companies.

Why Small-Cap Stocks?

Small-cap stocks are often considered riskier than large-cap companies but they have more growth potential and offer better returns, especially over the long term. Also, the small-cap stocks have the advantage of quickly changing direction and capitalizing on opportunities, given its small size.

Notably, sentiments of small-cap stocks are closely tied to the domestic economy as these generate most revenues from the domestic market. Small companies can begin to rebound in growing economies faster than larger companies. The upbeat sentiments, currently prevailing around the U.S. markets, provide the right environment for growth of small-cap companies, which are more trending in nature.

Some Underperforming Small Caps to Bounce Back in 2020

Despite the bullishness in markets this year, several small-cap stocks have underperformed the S&P 500. There are chances that some of these stocks might rebound in 2020, given favorable factors and their fundamental strength.

However, it is not easy to pick the potential winners from these undervalued stocks. With the help of the Zacks Stock Screener, we can make the tedious task easier. Here, we have narrowed down on stocks that have underperformed the S&P 500 so far this year, with a market capitalization of less than $1 billion and a Zacks Rank #1 (Strong Buy) or 2 (Buy).

To further shorten the list, stocks with VGM Score of A or B and upward earnings estimate revisions for the next year are taken into consideration.

Five Stocks Meeting the Criteria

The chart below shows year-to-date price performance of our five picks.

Adecoagro S.A. (NYSE:AGRO) is an agro-industrial company, with a market cap of $997 million. It engages in farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation activities in South America. So far this year, shares of the company have rallied 22%. The Zacks Consensus Estimate for its 2020 earnings has been revised 8.2% upward over the past 30 days. The Luxembourg City-based company has a VGM Score of A and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Genesco Inc. (NYSE:GCO) is a retailer and wholesaler of footwear, apparel, and accessories, with a market cap of $724 million. The Nashville, TN-based company’s shares have gained 11.2% year to date. Currently sporting a Zacks Rank #1, the stock has a VGM Score of A. Meanwhile, the Zacks Consensus Estimate for the company’s fiscal 2020 EPS has moved up 7.4% over the past 30 days.

American Outdoor Brands Corp. (NASDAQ:AOBC) is a producer and seller of firearms worldwide, and has a market cap of $508 million. So far this year, shares of the company have declined 28.3%. The Springfield, MA-based company currently has a Zacks Rank of 2 and a VGM Score of A. The Zacks Consensus Estimate for the company’s earnings for the next year has been revised 11.5% upward over the past 30 days.

J. Alexander's Holdings, Inc. (NYSE:JAX) operates complementary upscale dining restaurants in the United States. It offers an American menu and has a market cap of $146 million. So far this year, shares of the company have rallied 18.6%. The Nashville, TN-based company currently has a Zacks Rank of 2 and VGM Score of A. The Zacks Consensus Estimate for J. Alexander's 2020 earnings has been revised 2.9% upward over the past 30 days.

Tilly's, Inc. (NYSE:TLYS) is a retailer of casual apparel, footwear, and accessories for young men and women, and boys and girls in the United States. It has a market cap of $364 million. The company’s shares have gained 12.8% year to date. The Irvine, CA-based company currently sports a Zacks Rank #1. It has a VGM Score of A. The Zacks Consensus Estimate for Tilly's fiscal 2020 EPS has moved up 4.5% over the past 30 days.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

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.

Start Your Access to the New Zacks Top 10 Stocks >>



American Outdoor Brands Corporation (AOBC): Free Stock Analysis Report

Adecoagro S.A. (AGRO): Free Stock Analysis Report

Genesco Inc. (GCO): Free Stock Analysis Report

Tilly's, Inc. (TLYS): Free Stock Analysis Report

J. Alexander's Holdings, Inc. (JAX): Free Stock Analysis Report

Original post

Zacks Investment Research
5 Underperforming Small-Cap Stocks Ready To Explode In 2020
 

Related Articles

Daniel Shvartsman
A Bear Market Shopping List By Daniel Shvartsman - Jun 25, 2022

Volatility has been the constant in the 2022 bear market. Wherever we go in the next 12-18 months, bargains are starting to emerge. Here are five stocks I think are positioned well...

Tim Knight
Major Indices Closing The Gap By Tim Knight - Jun 24, 2022 2

Below are major indexes which have either closed their gaps are are extremely close to doing so. Dow Jones Composite: Dow Jones Industrials: S&P 500:

5 Underperforming Small-Cap Stocks Ready To Explode In 2020

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email