When it comes to investing in micro-cap stocks, it can sometimes be a real challenge to distinguish the potential winners from those that might not offer much near-term upside. However, a great way to uncover some possible leads is at conferences where investors can meet with the management teams of these smaller companies.
As the largest independent event for micro-cap companies, the annual Microcap Conference often yields some interesting ideas. This year's conference edition wrapped up earlier this month with presentations from over 75 different micro-cap companies.
In general, micro-cap stocks are those of companies with a market capitalization of less than $300 million. Despite their smaller size, some micro-cap companies have the potential to punch above their weight within their respective industries, so here are some of the more interesting stock ideas from the 2024 Microcap Conference.
Eden Research
U.K.-based Eden Research (LON: EDEN) specializes in plastic-free, sustainable solutions for crop protection, animal health and consumer products, with a focus on sustainable biopesticides and plastic-free encapsulation technology. The company's vision is to become a "global leader in sustainable crop protection."
Eden focuses on sustainably protecting high-value crops, improving yields, and marketability. So far, the company has commercialized two of its products. The first product, Mevalone, is a bio-fungicide sold in 14 European countries, the U.S., Australia and Kenya.
Eden Research partnered with Eastman Chemical (NYSE: EMN) to commercialize its second product, a nematicide called Cedroz. The companies are targeting 29 countries, and so far, 11 have granted full approval to the product, including the U.S., Mexico, Spain and Italy.
Genie Energy
With its market cap of $498.7 million, Genie Energy (NYSE: GNE) is technically a small-cap stock. The company is a retail provider of both green and conventional electricity and natural-gas supply. It provides both on-site and community solar-energy solutions, focusing on deregulated markets within the U.S.
Genie Energy also works with commercial enterprises, utility-scale solar developers and community solar developers on the planning, financing, design, construction, and operation of solar projects aimed at maximizing the value of solar generation.
Through its retail segment, the company serves homeowners and small, medium, and large businesses, supplying electricity from either renewable or conventional sources. Genie Energy also provides carbon-offset natural gas and conventional natural gas supply and end-to-end energy advisory services.
The company's Renewable Solutions division serves community solar programs, partnering with developers to finance their projects, acquire customers and manage the project. Genie Energy also enables commercial enterprises to leverage on-site solar generation to reduce their energy costs.
Hovnanian Enterprises
The largest company on this list, Hovnanian Enterprises (NYSE: HOV), is also technically a small-cap stock with a market cap of $1 billion. However, it was added to the Russell Micro-Cap Value Index in June 2023, and its market cap has grown dramatically since then.
Hovnanian is a national homebuilder that designs, constructs and markets a variety of for-sale housing in nearly 130 residential communities in 13 different states. In fiscal 2023, the company generated $2.76 billion in total revenues on 5,473 home deliveries, making it one of the largest homebuilders in the U.S.
Hovnanian has operations in Arizona, California, Delaware, Florida, George, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C., and West Virginia. Its homes are marketed and sold under the trade name K. Hovnanian Homes.
Investing in micro- and small-cap stocks
Small- and micro-cap stocks are typically more volatile than large-cap names, although that can be both good and bad. The surge in Hovnanian's stock price that took it from micro-cap to small-cap status in a matter of months is one example of how that volatility can work in investors' favor if they choose wisely.
However, with the possibility of sizable returns also comes a chance for significant risk. Unfortunately, it can be challenging to find public information on some micro-cap stocks. Nonetheless, many of the best companies voluntarily disclose pertinent information to investors even if their small size prevents them from being required to do so.
Additionally, smaller companies that trade on major exchanges may be required to disclose more information. Of course, it's always a good idea to research a company thoroughly before investing in it.
