9 Best Small-Cap Stocks to Buy in 2022

Analysts love these relatively cheap small-cap stocks.

The large-capitalization S&P 500 index generated a total return of 28.7% in 2021, while the Russell 2000 small-cap index total return was just 14.8%. Bank of America analyst Jill Carey Hall says small-cap stocks became about 9% more attractive relative to large-cap stocks from a valuation perspective last year, and small-cap stocks are now cheap relative to large-cap stocks “across every metric we track.” For investors willing to stomach the risk and volatility of small-cap stock investing, here are nine of the best small-cap stocks to buy in 2022, according to Bank of America.

Portillo’s Inc. (ticker: PTLO)

Portillo’s is a Chicago-style hot dog and Italian beef restaurant chain that went public in October. Portillo’s shares are already up about 36% from its $20 initial public offering price. Analyst Sara Senatore says Portillo’s first quarterly earnings report as a public company in November confirmed its market demand, including sales run rates at new locations that are 35% above target levels. Portillo’s plans to expand to 600 locations, and Senatore estimates that the company can generate $6.1 billion in annual sales at that size. Bank of America has a “buy” rating and $60 price target for PTLO stock, which closed at $26.81 on Feb. 4.

Global Blood Therapeutics Inc. (GBT)

Global Blood Therapeutics is a commercial-stage biopharmaceutical company that specializes in treating sickle cell disease. Analyst Jason Gerberry recently hosted a call with Global Blood management. Gerberry says the company’s Oxbryta drug for treating sickle cell has multiple sales catalysts, including a growing prescriber base and expansion of its label to children. He says easing of COVID-19 headwinds creates additional growth opportunities for Oxbryta as well. Finally, Gerberry says Global Blood’s research and development pipeline can boost peak sales potential and unlock value for investors. Bank of America has a “buy” rating and $76 price target for GBT stock, which closed at $27.59 on Feb. 4.

Bright Health Inc. (BHG)

Bright Health is a managed-care organization that is expanding its health care focus outside of Affordable Care Act exchanges and into Medicare Advantage and small-group health insurance. Bright exceeded analyst expectations when it issued preliminary 2022 sales guidance in December. Analyst Kevin Fischbeck says the company appears to be taking a more disciplined capital approach, including scrapping plans to expand into additional states. Its NeueHealth clinics are outperforming initial growth expectations, and Fischbeck says they have the potential to be profitable in the near term. Bank of America has a “buy” rating and $10.50 price target for BHG stock, which closed at $2.78 on Feb. 4.

Allogene Therapeutics Inc. (ALLO)

Allogene Therapeutics is a biotech company that specializes in allogeneic CAR T-cell cancer therapies. In January, Allogene announced that the U.S. Food and Drug Administration lifted a hold it placed on the company’s AlloCART programs in October 2021 after a chromosomal abnormality was observed in a single clinical trial patient. Gerberry says he wasn’t surprised the hold was lifted relatively quickly given the isolated nature of the event, and he says the pullback in Allogene shares following the announcement was simply a “sell the news” event. Bank of America has a “buy” rating and $37 price target for ALLO stock, which closed at $11.02 on Feb. 4.

BridgeBio Pharma Inc. (BBIO)

BridgeBio Pharma is a biopharmaceutical company focused on treating genetic diseases and cancers that have a single genetic driver. Following a recent BridgeBio conference presentation, analyst Greg Harrison says the company now has a redefined path for heart disease drug acoramidis after it failed to meet its primary endpoint in a Phase 3 study. Harrison says near-term upside will likely come instead from fresh data from BridgeBio’s achondroplasia and congenital adrenal hyperplasia trials in mid-2022. Bank of America has a “buy” rating and $34 price target for BBIO stock, which closed at $9.99 on Feb. 4.

Vnet Group Inc. (VNET)

Vnet is the second-largest Chinese carrier-neutral and cloud-neutral data center provider. VNET shares are down more than 74% in the past year as Chinese regulators have cracked down on domestic tech stocks. However, analyst Paul Dewberry says he remains positive on the long-term outlook for Vnet as China digitizes its economy. Dewberry says Chinese restrictions on data center size and usage should benefit larger players like Vnet. In the near term, Dewberry says, Vnet could face power and utilization pressures thanks to rising energy costs. Bank of America has a “buy” rating and $31.50 price target for VNET stock, which closed at $8.07 on Feb. 4.

Vroom Inc. (VRM)

Vroom is a U.S. online used car sales platform that delivers cars directly to customers’ homes. In November, Vroom reported earnings and sales that exceeded analysts expectations, but the company’s 123% e-commerce sales growth fell just short of Vroom’s guidance. Analyst Nat Schindler says Vroom will continue to battle logistics challenges in the near term. However, he says the company has a long-term growth runway in a highly fragmented U.S. used-car market, where e-commerce sales still have less than 1% market penetration. Bank of America has a “buy” rating and $65 price target for VRM stock, which closed at $7.27 on Feb. 4.

BTRS Holdings Inc. (BTRS)

BTRS is primarily a business-to-business, or B2B, bill payment and services provider. Analyst Jason Kupferberg says BTRS has a highly differentiated model and plenty of long-term revenue visibility. He says BTRS has a large, underpenetrated addressable market in electronic payments, and the company is well-positioned to gain market share with its payment products. Finally, Kupferberg says increasing adoption of BTRS’ Business Payments Network and its recent acquisition of a B2B collections management provider will help drive growth in software and payments segments. Bank of America has a “buy” rating and $13 price target for BTRS stock, which closed at $6.25 on Feb. 4.

Sangamo Therapeutics Inc. (SGMO)

Sangamo Therapeutics is a clinical-stage biotech company focused on gene therapy. Investors got bad news in January when Sangamo and partner Sanofi (SNY) announced the termination of their collaboration on SAR445136, a cell therapy intended to treat sickle cell disease. Analyst Aspen Mori says the termination is not ideal. However, the market was assigning little value to SAR445136, and Sangamo says the setback is not the end of the program. In fact, Mori says Sangamo presented encouraging Phase 1/2 test data in December. Bank of America has a “buy” rating and $18 price target for SGMO stock, which closed at $5.56 on Feb. 4.

9 best small-cap stocks to buy in 2022:

— Portillo’s Inc. (PTLO)

— Global Blood Therapeutics Inc. (GBT)

— Bright Health Inc. (BHG)

— Allogene Therapeutics Inc. (ALLO)

— BridgeBio Pharma Inc. (BBIO)

— Vnet Group Inc. (VNET)

— Vroom Inc. (VRM)

— BTRS Holdings Inc. (BTRS)

— Sangamo Therapeutics Inc. (SGMO)

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