As investors, small-cap stocks offer us the possibility of monumental returns. If you play your cards right, small-caps can deliver gains most blue chips could never match.
Of course, there’s no reward without risk. Many small-cap companies fail because of a lack of funding or the inability to scale operations. But we can mitigate some risk by keying in on broader trends and finding firms with healthy cash reserves. As we move into 2024, broader tailwinds point toward potential small-cap out-performance.
Barring any black swan events, I predict steady economic expansion next year. This should benefit small, domestically-focused firms. As rates decline in 2023, we could see robust returns for growth stocks. Let’s take a look!
Zymeworks (NASDAQ:ZYME) stands out as a diamond in the rough. This clinical-stage oncology player develops bio-specific antibody therapeutics with differentiated mechanisms of action compared to existing standards of care.
Zymework’s lead pipeline candidate, zanidatamab, targets HER2-expressing cancers like breast, gastric, and biliary tract. So far, data underscores its promising efficacy and safety in multiple studies.
At September’s ESMO conference, updated results showed “meaningful clinical benefit” in HER2+ gastroesophageal cancers. Plus, the FDA granted zanidatamab Breakthrough Designation status back in 2020.
Considering the high unmet need and zanidatamab’s unique MOA, further positive data could support expedited regulatory approvals. With initial launches approaching, zanidatamab may soon emerge as a new standard of care in areas like frontline gastric cancer.
If clinically meaningful revenues materialize, ZYME could deliver explosive growth from today’s depressed levels.
I believe ZYME offers an attractive risk-reward setup at its current sub-$700 million market cap. The balance sheet appears solid, with cash projected to fund operations for years.
While clinical-stage biotech investing always involves speculation, zanidatamab’s progress and the unmet need may warrant a calculated bet.
High Tide (HITI)
While most cannabis firms bleed cash, High Tide pushes towards profitability and positive cash flow. Analysts forecast full profitability by 2025 and significant expansion ahead.
Based on 2030 earnings expectations, HITI’s forward P/E ratio drops to just 2.5x – a bargain for high-growth stocks. Of course, these rosy projections require a spoonful of salt, given regulatory uncertainties and early-stage financials.
Still, I’m compelled by High Tide’s rock-bottom 0.35x price/sales multiple alongside 30%+ revenue growth. The valuation discounts business execution risks and offers substantial upside if the U.S. passes fderal legalization.
Shifting from cannabis to Turkish e-commerce, D-Market (NASDAQ:HEPS) is another potential high-growth home run trading at value prices.
This Istanbul-based player operates Hepsiburada.com, Turkey’s leading online retailer.
Given Turkey’s high inflation, investing in HEPS brings economic risks. However, interest rate hikes may curb price growth if sustained. Regardless of macro conditions, Hepsiburada has fired on all cylinders operationally.
Analysts forecast HEPS’s first full-year profit in 2023 alongside nearly 100% top-line growth between 2023-2025. The projections may be aggressive due to execution risks in an emerging market, but I am compelled by the potential over 3-5 years.
If Hepsiburada can replicate the success of Latin American e-commerce peers like MercadoLibre, early investors may realize triple-digit returns or higher.
The key variable is Turkey’s inflation trajectory and impact on consumption trends. But with a strong GDP growth forecast through 2025, the environment appears constructive for HEPS to capitalize on secular e-commerce adoption tailwinds.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.