Finding the best small cap stocks to buy can be tricky.
The markets have had a great run since last year, but now there’s showing signs of losing steam. Large-cap companies are nearing their previous highs, and investors are wary of entering overvalued trades.
Some of them have looked into the next big thing — and one of the best places to look for is in the small-cap stock sector.
Small-cap stocks are usually small or startup companies with low valuations, with market caps between $250 million and $2 billion. These stocks are susceptible to broad fluctuations, especially when investor interests are high. Traders and investors with more aggressive risk profiles can exploit these wide price swings to win big.
Others prefer small-cap stocks for their low prices and potential growth; buying into a small startup before becoming a large-cap company can generate life-changing profits.
With the big leagues getting overcrowded, this may be the best time to look at attractive, growth-oriented small-cap stocks to buy.
Yalla Group Ltd. (YALA)
Yalla Group Ltd. (NYSE:YALA) is a holding company based in the United Arab Emirates operating in the social networking and gaming segment through subsidiaries.
Yalla’s platform provides its users with voice live streaming, voice-based chatting, and social networking. It has two flagship projects: Yalla, a social networking platform, and Yalla Ludo, an app that allows users to play board games such as Domino and Ludo.
Recently, Yalla is focusing heavily on leveraging the continuously growing gaming and e-sports trend. It recently launched Age of Legends, its first self-developed multiplayer online roleplaying game (MMORPG), on Google Play.
The company also released Merge Kingdom on June 2023, an entry to the real-time strategy genre. Yalla’s active push towards gaming earned it a spot in the Dubai Esports and Games Festival this year.
Target Hospitality Corp (TH)
Target Hospitality Corp. (NASDAQ:TH) is one of the largest specialty rental and hospitality services companies in the United States, offering 16,830 beds with its relocatable specialty rental accommodation units across 27 communities.
Target Hospitality released stellar earnings and revenue for 2Q2023, with EPS ending at $0.44, 18.92% more than the predicted $0.37. Revenue grew 31% compared to last year’s period, coming in at $143.6 million.
With its West Texas facility expanding via government contract, the company is on its way to strengthening its financial performance.
Danaos Corporation (DAC)
Danaos Corporation (NYSE:DAC) is a marine freight and logistics holdings company that owns vessels and containerships in its liner companies.
The company owns a fleet of 68 container vessels that range from 2,200 to 13,100 twenty-foot equivalent units (TEUs).
The company’s principal business revolves around the operation and acquisition of vessels through its own vessel-owning companies that own and operate the containerships mentioned earlier and are managed by a company-related party.
Danaos’ 2Q2023 numbers came in strong, with EPS beating estimates by 21.02% at $7.14 per share. Meanwhile, revenue beat forecasts by 6.97% at $241.48 million.
As of June 2023, the company has repurchased a total of $65.5 million worth of its common shares as part of its $100 million buyback program announced last year.
With container freight rates massively discounted from their all-time highs and DAC’s highly-visible cash flow generation from revenue backlogs, the company is still well-positioned for growth.
On the date of publication, Rick Orford did not have (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.