Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
Himax (HIMX)
Market Cap: $1.31 billion
Taiwan-based Himax Technologies (NASDAQ:HIMX) is a leading manufacturer of display driver chips and timing controllers used in TVs, laptops, and mobile phones.
Why Does HIMX Give Us Pause?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.5% annually over the last two years
- Estimated sales for the next 12 months are flat and imply a softer demand environment
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 15.2 percentage points
Himax’s stock price of $7.48 implies a valuation ratio of 19.2x forward P/E. If you’re considering HIMX for your portfolio, see our FREE research report to learn more.
HA Sustainable Infrastructure Capital (HASI)
Market Cap: $3.45 billion
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE:HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
Why Does HASI Fall Short?
- Performance over the past five years shows its incremental sales were less profitable, as its 8% annual earnings per share growth trailed its revenue gains
- ROE of 7.8% reflects management’s challenges in identifying attractive investment opportunities
- Negative EBITDA restricts its access to capital and increases the probability of shareholder dilution if things turn unexpectedly
HA Sustainable Infrastructure Capital is trading at $27.75 per share, or 9.9x forward P/E. To fully understand why you should be careful with HASI, check out our full research report (it’s free).
Two Harbors Investment (TWO)
Market Cap: $1.05 billion
Operating in the complex world of mortgage finance since 2009, Two Harbors Investment (NYSE:TWO) is a real estate investment trust that invests in mortgage servicing rights and agency residential mortgage-backed securities.
Why Do We Think TWO Will Underperform?
- Annual net interest income declines of 47.1% for the past five years show its loan book struggled during this cycle
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 20.2% annually while its revenue grew
- Tangible book value per share tumbled by 14.6% annually over the last five years, showing banking sector trends are working against its favor during this cycle
At $9.84 per share, Two Harbors Investment trades at 0.8x forward P/B. Check out our free in-depth research report to learn more about why TWO doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
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