Although the vast majority of financial advisors will recommend you stay away from speculative small-capitalization ideas, in narrowly defined cases, they may offer certain advantages. Primarily, companies that don’t attract much mainstream attention are able to fly under the radar, thus separating themselves from broader market rumblings. Right now, the best micro-cap stocks to buy could provide compelling opportunities.
Essentially, blue-chip firms don’t just represent an avenue for retail investors to park their money. They also act as real-time economic indicators. It should be no surprise that when Walmart (NYSE:WMT) and Target (NYSE:TGT) released disappointing earnings results, Wall Street took a beating. If the consumer isn’t healthy, big-box retailers will be among the first to suffer. However, the best micro-cap stocks to buy don’t operate under such immense pressure.
To be completely blunt, these high-risk, high-reward securities are not appropriate for most investors. Like cryptocurrencies, they can move dramatically on good news, bad news or no news at all. You must have an iron stomach to handle the volatility coming your way. But if that fits your profile, these ideas for best micro-cap stocks to buy could be to your liking.
| SKYT | Skywater Technology | $6.64 |
| AMSC | American Superconductor | $5.19 |
| DS | Drive Shack | $1.53 |
Skywater Technology (SKYT)
While American consumers and the broader economy have greatly benefitted from the riches of globalization, nothing in life is ever free of consequences. With globalization, the risk of geopolitical conflicts and interdependencies create tremendous security risks, as demonstrated by President Joe Biden’s clarification on U.S. military policy regarding the potential defense of Taiwan.
Naturally, the Chinese government took exception at Biden’s blunt admission that the U.S. will defend the breakaway island territory against an invasion, sparking a sharp response. Of course, Taiwan is critical to the global economy due to its semiconductor foundry dominance. But that also makes Skywater Technology (NASDAQ:SKYT) one of the best micro-cap stocks to buy.
Specializing in semiconductor engineering and fabrication foundry, Skywater’s claim to fame is that the company, per its website, is “U.S.-based and solely U.S.-owned.” SKYT plays right into contemporary headlines, meaning you should keep close tabs on this under-the-radar play.
American Superconductor (AMSC)
Easily one of the best micro-cap stocks to buy based on the underlying fundamentals, American Superconductor (NASDAQ:AMSC) is an energy technologies firm. Specifically, it specializes in the design and manufacture of power systems and superconducting wire.
According to a report by Research and Markets, “Superconducting wires have zero electrical resistance, when superconducting materials are cooled down below their transition temperature. Thus, superconductor wires transfer electricity without resistance.” Experts there project that the global superconductor market will expand to $1.4 billion by 2026, representing a compound annual growth rate of 4% from 2020.
For AMSC, superconductors provide two main functions. First, the technology enables the company to provide greater power volumes while imposing less footprint on physical space. Logically, with the growing global population, such an attribute will be critical.
Second, superconductors help make power infrastructures more robust and resilient, which has significant implications regarding the future electric vehicle rollout. Thus, AMSC is the stage manager of myriad exciting innovations, making it one of the best micro-cap stocks to buy.
Drive Shack (DS)
An entertainment venue that caters to corporate get-togethers, Drive Shack (NYSE:DS) obviously hemorrhaged a great deal when the coronavirus pandemic struck, forcing people to work from home and non-essential businesses to temporarily shut down. However, over the trailing month, DS stock is up around 26%. Is a legitimate turnaround occurring, or is this merely irrational technical trading?
It’s quite possible that the fundamentals could be favoring Drive Shack. Basically, the work-from-home experiment might come to an end. With companies facing recessionary pressures, they need to minimize headcount and maximize productivity. And the harsh reality is that during the pre-pandemic years, employees relished wasting time on the clock, contributing to billions of dollars of lost productivity.
That raises questions about whether these same workers are more productive without supervision and accountability.
Therefore, it’s within the realm of possibility that the return to normal at the workplace could see DS enjoying downwind benefits. Still, this is one of the riskiest ideas among the best micro-cap stocks to buy, so extreme caution is warranted.
On the date of publication, Josh Enomoto 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.