Small-cap stocks are an attractive option for those willing to take risks for high rewards. These stocks have the potential for substantial short-term growth but also carry greater risk for the investor. Therefore, it pays to understand which small-cap stocks could offer the best returns and provide a list of the top stocks to consider for a high risk, high reward strategy.
What Is a Small-Cap Stock?
A small-cap stock, also known as a micro-cap stock, is a share of a company’s stock that has a very small market capitalization (market cap). The market cap is the total value of a company’s stock and is determined by multiplying the number of shares available by the current share price. Companies with market caps of $50 million to $300 million are classified as small-cap stocks.
What Makes Small-Cap Stocks Risky?
Small-cap stocks come with a number of risks due to their lack of stability and liquidity. These companies usually lack the track record, brand recognition, and financial strength to compete with the large-cap stocks of the world. Since these stocks are often not as well-known or researched, they can experience sharp price swings due to a lack of overall buyers or sellers. Additionally, due to the limited liquidity of small-cap stocks, it can be difficult to sell large amounts of shares quickly, as there are fewer potential buyers.
Advantages of Investing in Small-Cap Stocks
Despite the risks associated with small-cap stocks, there are potential rewards when done right. Small-cap stocks can offer investors the potential for greater rewards due to the increased upside potential in companies with smaller market caps. As the company grows, so will the stock price and the potential returns to the investor.
Additionally, small-cap stocks may bring higher dividends per share, allowing investors to get back more return on their investment. Furthermore, these stocks have the potential to benefit from a wave of investor sentiment as the public becomes aware of the successes of the smaller company.
The Best Small-Cap Stocks for High-Risk, High-Reward Investments
For those looking to take a riskier, higher reward approach to investing, here are some of the best small-cap stocks to consider:
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Fandom Sports Media (FDMSF): Fandom Sports Media is a small-cap stock trading on the OTCQB. The company provides a digital platform for sports fans to connect and interact. Fandom is quickly becoming the go-to social media platform for sports fans and has seen strong gains in its stock price as a result.
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CloudMD Software (DOC.TO): CloudMD Software is a Canadian small-cap stock that provides telemedicine services to patients. The company has seen explosive growth in recent months due to the pandemic, and investors have seen significant gains as a result.
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SkinCentric (SKNX): SkinCentric is a small-cap stock trading on the Nasdaq Vice Market. The company operates a direct-to-consumer skincare brand and has seen strong interest in its products and stock price.
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Plantur21 (PLAN): Plantur21 is a German small-cap stock that produces natural hair care products. The company has been growing steadily over the past few years and has seen its stock price rise as a result.
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Apogee Beverage (APOG): Apogee Beverage is a small-cap penny stock trading on the OTC Markets. The company manufactures, distributes, and markets dairy-free and low-sugar beverages. Apogee has seen significant growth in recent months and its stock price has also gained.
Small-cap stocks can offer investors high risk, high reward opportunities if done right. However, it’s important to remember that these stocks are not without risk. That said, if investors are diligent in their research and make smart decisions, the potential rewards can be quite attractive. The above-mentioned five stocks are just a few of the best small-cap stocks to consider if you’re looking for rewarding returns.
