As the old saying goes, past performance doesn’t guarantee future returns. But it’s not uncommon for stocks that are struggling to keep circling the drain and for recent outperformers to continue to ride their momentum even higher going forward.
[Sign up for stock news with our Invested newsletter.]
The following companies are among the best small-cap stocks to buy in 2024, thanks to impressive returns in the prior year and strong outlooks for the future. All have delivered gains of more than 100% since Jan. 1. At the same time, all are still modest in size, with no stock over $10 billion and a few smaller than $1 billion.
There’s risk in smaller stocks, as they are not as well capitalized as big-name blue chips. There’s also a chance that prior gains and enthusiasm will fade away in the new year if things go sideways for the broader economy, or for these stocks in particular.
That said, the following nine companies all clearly have something to offer, and each is worth considering if you’re looking for the top small-cap stocks to buy in 2024:
| Stock | Sector | Market Cap* | YTD Gain* |
| Applied Optoelectronics Inc. (ticker: AAOI) | Technology | $692 million | 882% |
| Bitfarms Ltd. (BITF) | Finance | $731 million | 415.9% |
| Carvana Co. (CVNA) | Consumer discretionary | $6.8 billion | 740.3% |
| Carrols Restaurant Group Inc. (TAST) | Consumer discretionary | $435 billion | 491.9% |
| Duolingo Inc. (DUOL) | Technology | $9.3 billion | 203.9% |
| e.l.f. Beauty Inc. (ELF) | Consumer staples | $7.1 billion | 132.6% |
| Forestar Group Inc. (FOR) | Real estate | $1.6 billion | 103.2% |
| Simpson Manufacturing Co. Inc. (SSD) | Materials | $7.7 billion | 106.9% |
| Talkspace Inc. (TALK) | Health care | $391 million | 290.2% |
*As of Dec. 11 close.
Applied Optoelectronics Inc. (AAOI)
Sector: Technology Market cap: $692 million 2023 performance: +882%
Manufacturer Applied Optoelectronics produces fiber optic equipment, lasers and other high-tech gear. It’s a small, niche player, but like many of the best small-cap stocks to buy now, its unique and focused business line allows it to zero in on an opportunity and make the most of it. With a continued focus on the 5G build-out of wireless networks in America and red-hot competition between major telecom carriers, the scene is set for a big year for fiber optics in 2024. AAOI stock has been volatile, but after strong forward guidance lately, shares are trading at new 52-week highs after an already impressive run across the prior year.
Bitfarms Ltd. (BITF)
Sector: Finance Market cap: $731 million 2023 performance: +415.9%
Cryptocurrency miner Bitfarms is an indirect play on the Bitcoin surge we’ve been seeing lately. The firm has a headquarters in Toronto but operates server farms in low-cost regions including Paraguay and Argentina. One of the cheapest stocks on this list, with shares around $2 apiece, it is a very accessible small-cap stock for small-time investors. Furthermore, it is up more than two times the roughly 150% return for Bitcoin in 2023 thanks to diversification into other digital asset areas, too. If you want to play what you think is a return of the crypto craze in 2024, BITF is a small but interesting stock to consider.
Carvana Co. (CVNA)
Sector: Consumer discretionary Market cap: $6.8 billion 2023 performance: +740.3%
With shares up more than sevenfold year to date in 2023, it’s hard to find a small-cap stock that has more impressive gains lately than innovative car dealer Carvana. That said, CVNA is anything but a slam dunk given the volatility in shares over the medium term — including talk the company could evaporate altogether. But thanks to a major restructuring of its debt along with a secondary stock offering to raise cash, CVNA stock is better capitalized and winning over investors once more. There’s still challenges ahead with living up to growth expectations and dealing with a continued cash burn as the company tries to enter consistent profitability. But if you’re an ambitious investor, CVNA could be worth a look thanks to strong momentum as it enters 2024.
Carrols Restaurant Group Inc. (TAST)
Sector: Consumer discretionary Market cap: $435 million 2023 performance: +491.9%
Though you may not recognize the corporate parent, you may have eaten at a Carrols restaurant recently, as it operates more than 10,000 franchised locations under nameplates including Burger King and Popeyes. Unfortunately for shareholders a few years back, it wasn’t the best-run operation, however, as persistent net losses and high expenses across 2019 put it in a rather terrible position to weather pandemic-related disruptions in 2020 and 2021. TAST stock seems back on track, though, with a return to profitability in the current year. Shares have surged higher on the turnaround news, and Carrols is trading around its 52-week high as the stock charges into 2024.
Duolingo Inc. (DUOL)
Sector: Technology Market cap: $9.3 billion 2023 performance: +203.9%
Duolingo has become synonymous with language-learning software, offering courses in 40 different languages. It’s not just for international travelers, however, offering a digital language proficiency assessment exam that is increasingly a key part of its growth strategy. As of Q3, it boasted 5.8 million paid subscribers — up 60% over the prior year. And unlike some of the riskier small-cap tech stocks out there, it is soundly profitable and sitting on a nice cash hoard of about $700 million to ensure it can weather any short-term disruptions. Throw in a roaring stock price, with shares within reach of yet another 52-week high, and DUOL seems like one of the best small-cap stocks to buy for 2024.
[READ: 5 Funds Trading at the Biggest Discounts to NAV]
e.l.f. Beauty Inc. (ELF)
Sector: Consumer staples Market cap: $7.1 billion 2023 performance: +132.6%
Skincare and cosmetics firm e.l.f. Beauty sells its products through major retailers worldwide, and is probably a brand many investors recognize. It’s growing fast, with projected revenue expansion of almost 60% in the current fiscal year and another 20% next year on top of that. Cosmetics are an enviable corner of the consumer landscape because while a bit pricey and commanding better margins than workaday products like toothpaste or dish soap, they are incredibly reliable expenditures for households, and few people want to give up their normal beauty routines just because the economic environment sours a bit. If you want a fast-growing small-cap stock that may have some staying power if things get rocky in 2024, ELF is worth a look.
Forestar Group Inc. (FOR)
Sector: Real estate Market cap: $1.6 billion 2023 performance: +103.2%
Forestar Group Inc. operates as a residential lot development company in the U.S., meaning it acquires land and develops infrastructure for single-family residential communities. To be clear, it doesn’t build the homes — it just sets up the sites then sells them to homebuilders, primarily D.R. Horton Inc. (DHI) which has an ownership stake. This is an enviable position to be in as real estate prices consistently rise, because FOR doesn’t have to worry about the economics of building. Its value comes from the sale price of the land rather than the structure, creating a more consistent performance for investors.
Simpson Manufacturing Co. Inc. (SSD)
Sector: Materials Market cap: $7.7 billion 2023 performance: +106.9%
Wood, concrete and construction products company Simpson is one of those boring but valuable stocks that continues to deliver even if it doesn’t snag all the headlines. Anyone who has visited the hardware store lately should know that prices for lumber — among other materials — have gone through the roof in recent years, and that has boosted margins for SSD. Even though revenue tends to be very consistent year to year, this has allowed for what is expected to be a 10% surge in earnings in 2023. Additionally, housing “starts” continue to be stronger than expected in the U.S., even if they’re not as robust as during previous low-interest-rate years, hinting that Simpson should continue to deliver in 2024 as well.
Talkspace Inc. (TALK)
Sector: Health care Market cap: $391 million 2023 performance: +290.2%
An innovative virtual behavioral health care company, Talkspace is designed to offer “talk therapy” via psychiatry and mental health services that are delivered digitally. It employs licensed therapists, and uses tools including text, audio and video-based treatment to connect with patients. With low overhead but incredibly high demand and patients that are increasingly comfortable with remote therapy, TALK is a stock that seems to fit perfectly with the current moment in time. The company is still posting modest losses, but with revenue growth of more than 20% this fiscal year and a projected 25% growth in 2025, there’s a lot of potential for this fast-growing small-cap health care stock.
More from U.S. News
Election 2024: How Stocks Perform in Election Years
9 Best Small-Cap Stocks to Buy in 2024 originally appeared on usnews.com
Update 12/12/23: This story was previously published at an earlier date and has been updated with new information.
