The S&P Small Cap 600 index is already up 10.7% this year compared to a 3.1% return for the large cap S&P 500. This disparity is partly due to the fact that Gamestop is a member of the S&P 600—and despite its recent plunge is still up 200% year-to-date.
But there have been some other big winners including 3D printing company 3D Systems and Bitcoin play Microstrategy. While chasing stocks like these may not be the best idea, there are some other small cap names that appear ready to break out in the weeks ahead. Let's dive into a few of these small but mighty companies.
Is the Pullback in 1-800-FLOWERS.COM Stock a Buy Opportunity?
When it comes to online sales of flowers and gift baskets 1-800-FLOWERS.COM (NASDAQ:FLWS) is a cut above the rest. The stock rallied to a record high of $39.61 on January 28th as the bulls and bears wrestled with the company's second quarter earnings report. The wild ride that saw the stock swing more than 20% and ultimately close down was due to tepid third quarter guidance that won out over strong Q2 results.
1-800-FLOWERS reported record revenue of $877.3 million and earnings per share (EPS) of $1.71 both of which handily beat consensus expectations. Sales and profits were up 45% and 51%, respectively. Like many other e-commerce retailers these days, the company is benefitting from higher demand for its products. People not able to see family and friends during the pandemic have found sending flowers and food-laden gift baskets to be a good way to show they care.
Management, however, refrained from offering full year guidance and said it expects a loss of around $0.10 per share for the current quarter. This is indeed a downer but coming off the strong holiday quarter, it is not shocking given the seasonal nature of the business.
Investors need not worry, 1-800-FLOWERS.COM will get well soon. Absent large gatherings like birthday parties, 1-800-FLOWERS will likely continue to be a popular gift destination as the year goes on. Some conservative guidance in a favorable online shopping environment may be setting the stage for another big top and bottom-line beat.
The price of 1-800-FLOWERS.COM has been pruned back to around $30. Last week Noble Financial reiterated its buy rating on the stock giving it a $44 target. Look for it to sprout back up this Spring.
Should I Build a Position in Construction Partners Stock?
Construction Partners (NASDAQ:ROAD) went public in May 2018 and has been one of the best performers in the construction and engineering space. The stock's March 2020 pothole was mild compared to most industrials and it has since climbed to above $30.
On February 2nd more than 1.5 million shares of Construction Partners exchanged hands. This was due to a broader rally in infrastructure stocks and anticipation of the company's February 5thearnings release.
Construction Partners reported mixed results for its fiscal first quarter. Revenue was up 9% to $190.9 million but missed expectations by almost $8 million. EPS of $0.15 beat the Street by a penny.
More importantly, the company reported a strong order backlog of $655.6 million which was 8% higher than three months prior. This points to increasing demand for its road construction services as economic activity rebounds.
Meanwhile, the Biden administration's plan to spend mightily on infrastructure bodes well for Construction Partners and the industry as a whole. With exposure to both the public and private sectors greater demand for highways, bridges, and airport renovations, should lead to above industry growth at Construction Partners. Investors that get in now will be on the road to solid gains.
Will Star Bulk Carriers Right the Ship?
After a nice run to start the year Star Bulk Carriers (NASDAQ:SBLK) stock appears to recoiling for another pop. As one of the world's largest dry bulk shipping companies, Star Bulk Carriers operates a fleet of 126 bulk carriers that transport commodities like grains, coal, and metals across the world's seas.
Earlier this week, Star Bulk Carriers signed a deal with Scorpio Bulkers to purchase seven Scorpio vessels worth approximately $102 million. While Star Bulk will dilute shareholders in the process by issuing 3 million new shares to pay for the transaction, the agreement points to better times ahead for the beleaguered shipper.
For the first 10 months of 2020, Star Bulk's orderbook was at a record low 6.3% of its fleet capacity amid low levels of dry bulk new orders during the pandemic. In 2021, dry bulk volumes are expected to rebound as global economic conditions improve and there is higher demand for commodities.
While coal volumes are expected to decline, demand for U.S. soybeans and corn amid improving U.S.-China trade relations is expected to improve. Higher Chinese demand for iron ore to support building and vehicle manufacturing should also drive better results at Star Bulk Carriers in 2021.
Keep in mind, that this company has enacted a pair of reverse stock splits over the years that together amount to a 1-for-75 reverse split. So, this is a penny stock in disguise and therefore a highly speculative play. But with improving fundamentals in the dry bulk shipping industry, hopping on board Star Bulk Carriers stock here could lead to some big gains.
Featured Article: How a Put Option Works7 Semiconductor Stocks Set to Gain From the Chip Shortage
Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.
Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.
Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.
However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.
Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.
Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.
In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.
View the "7 Semiconductor Stocks Set to Gain From the Chip Shortage"
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