After a roaring 2023, with the S&P 500 up about 26% last year, we’ve seen a continued bullish environment to start 2024. The popular S&P benchmark is up another 7% or so since New Year’s Day — and perhaps unsurprisingly, tech stocks and other “risk on” stocks are leading the charge.
Small-cap stocks can be a great way for investors to capitalize on this positive momentum. While large companies often have big and stable operations, they can struggle to move quickly enough to capitalize on fast-moving trends. Furthermore, it’s often much harder for a stock that has $100 billion in revenue to double its sales when compared with a hungry upstart that only has $100 million on the top line.
While some consider small-cap stocks to have market capitalizations between $300 million and $2 billion, inflation and a growing economy have elevated valuations. For the purposes of this article, we’ll use a more liberal definition of small-cap stocks as stocks with market caps of less than $10 billion.
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The following nine small-cap stocks all have impressive performance recently, and are all on the smaller side of the size spectrum to provide what could be sustained and significant upside if they continue to power higher in the months ahead:
| Stock | Market cap | 12-month return |
| AppFolio Inc. (ticker: APPF) | $8.1 billion | 95% |
| BellRing Brands Inc. (BRBR) | $7.9 billion | 101% |
| Eagle Materials Inc. (EXP) | $8.8 billion | 86% |
| Guidewire Software Inc. (GWRE) | $9.6 billion | 61% |
| Informatica Inc. (INFA) | $9.9 billion | 102% |
| Light & Wonder Inc. (LNW) | $9.2 billion | 75% |
| MKS Instruments Inc. (MKSI) | $8.4 billion | 47% |
| SoundHound AI Inc. (SOUN) | $2.3 billion | 209% |
| Sweetgreen Inc. (SG) | $2.4 billion | 170% |
AppFolio Inc. (APPF)
Market capitalization:
$8.1 billion 12-month return: +95%
A highly specialized software firm, AppFolio provides cloud-based real estate management solutions to streamline leasing, maintenance and accounting for property managers. Most investors have heard of the juicy premiums charged for rents in high-demand housing markets, so it’s logical that there’s a firm like APPF out there to help landlords get the most out of their real estate holdings. The firm is in high demand, with 23% revenue growth forecasted this fiscal year and another 20% growth in fiscal 2025. Shares are red hot, too, with the stock roughly doubling over the last 12 months.
BellRing Brands Inc. (BRBR)
Market capitalization: $7.9 billion 12-month return: 101%
Though perhaps not as popular a brand as other packaged foods companies, BellRing offers ready-to-drink nutritional supplements including its main line of shakes under the Premier Protein and Dymatize brands. Meal replacement and general healthy eating are a hallmark of younger Americans, and BellRing makes shakes fun with innovative flavors like salted caramel and cookie dough. With double-digit revenue growth expected both this year and next, along with increased guidance for fiscal 2024 after its February earnings report, BRBR is a stock that has the numbers on its side. It also has momentum, with shares roughly doubling in the last year.
Eagle Materials Inc. (EXP)
Market capitalization: $8.8 billion 12-month return: +86%
Eagle Materials is a building products firm that mainly provides cement, concrete and drywall sheets. While higher interest rates weighed on new constructions in 2022 and early 2023, the recent plateau in rates along with hopes that the U.S. Federal Reserve may engage in cuts later in 2024 has boosted builder optimism. Single-family housing starts have been brisk since the start of the year, and that has naturally been lifting Eagle. Stocks like EXP can be cyclical, meaning they are sensitive to the overall ups and downs of the economy at large, but if you’re optimistic about the state of jobs, housing and spending, then EXP is a small-cap stock to consider as it rides recent momentum to new 52-week highs.
Guidewire Software Inc. (GWRE)
Market capitalization: $9.6 billion 12-month return: +61%
Another hyper-targeted tech company like AppFolio, Guidewire provides a software platform made for property and casualty insurance companies to streamline billing and claims management. It’s a specialized business but a lucrative one, with this small-sized tech stock growing fast. Case in point: Fiscal 2024 earnings are set to surge from 35 cents a share last year to $1.13 — more than a threefold increase — before rising to a projected $1.72 next fiscal year. No wonder GWRE stock has seen a big uptrend over the last year.
[READ: 10 Best Growth Stocks to Buy Now]
Informatica Inc. (INFA)
Market capitalization: $9.9 billion 12-month return: +102%
One of several up-and-coming artificial intelligence stocks, Informatica connects, manages and unifies data for customers through the use of artificial intelligence. This isn’t just a story of hype, however, as the firm is comfortably profitable and growing at a good clip. In February, Informatica announced better-than-expected quarterly results and strong forward guidance that resulted in a double-digit pop for shares over just a few trading sessions. The recurring revenue from INFA’s cloud subscription platform also helps ensure this short-term success is replicated going forward.
Light & Wonder Inc. (LNW)
Market capitalization: $9.2 billion 12-month return: +75%
Despite the rather fantastical name, Las Vegas-based Light & Wonder is a pretty straightforward company that sells gambling technology for use in physical casinos as well as digital applications. This includes video lottery terminals, table products like automatic card shufflers and chip sorters, and an “igaming” segment that provides digital alternatives as well as player account management systems. With the rise of sportsbooks and a generally strong consumer spending environment, gaming has been on the rise, and LNW has been cashing in lately thanks to the popularity of its specialized product line.
MKS Instruments Inc. (MKSI)
Market capitalization: $8.4 billion 12-month return: +47%
MKS isn’t a chipmaker, but it is related to this booming industry as it provides testing and production solutions to related companies in the U.S. as well as globally. If you’ve followed semiconductor stocks lately, you know that they are all doing quite well thanks to strong demand and limited supply that provides strong pricing trends. MKS is crucial to ensuring that these firms keep operating efficiently and reducing errors and delays in their processes. The company was incorporated in 1961 and has a long and respected history, making it a go-to partner in its very specialized field. The company is predicting more than 12% sales growth next fiscal year and trades near new 52-week highs.
SoundHound AI Inc. (SOUN)
Market capitalization: $2.3 billion 12-month return: +209%
One of several popular AI stocks on Wall Street, SoundHound is a voice-enabled software that serves businesses across a host of industries ranging from entertainment to customer service, delivering high-quality “conversational experiences.” The stock has been on an absolute tear lately, roughly tripling in the last year or so thanks to both the AI craze and its fundamentals. While not yet profitable, the company is forecast to grow its top line by more than 50% this year and nearly another 50% in fiscal 2025 on top of that. Shares are volatile, but if you’re looking to play a small-cap AI stock, then SoundHound is near the front of the pack.
Sweetgreen Inc. (SG)
Market capitalization: $2.4 billion 12-month return: +170%
For those unfamiliar, Sweetgreen is a popular fast-casual eatery that provides fresh salads and vegetable dishes for a healthier alternative to a burger or fried chicken for lunch. The chain is a bit of a cult sensation with younger professionals, and SG has been expanding aggressively as it looks to capitalize on two trends: a push for return-to-office after COVID-19 and the simple reality that Americans typically spend more on food at restaurants than food at home. These tailwinds are paying off, as Sweetgreen popped more than 20% in a single session after a strong fourth-quarter report a few weeks ago and has nearly doubled since the start of the year.
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9 Best Small-Cap Stocks to Buy for 2024 originally appeared on usnews.com
Update 03/13/24: This story was previously published at an earlier date and has been updated with new information.
