RBC High Potential Small Cap Growth Investments

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  • RBC analysts say these 21 small businesses should experience strong and sustained growth.
  • Investors have become skeptical of growth stocks and smaller companies.
  • Based on price targets, they believe many of these stocks will double over the next 12 months.

For 10 years or more, Wall Street thought Big Tech was a safe bet. Now, that’s not so sure.

Whatever has happened in the past few years, investors have always come back to FANG or


FANG

or FAANMG+ – or similar small clubs of giant corporations – because they offered exceptional growth, big returns and seemed to have unshakable positions in the market.

Much has changed in recent months, and investor confidence in these companies seems to have been shaken in a way that has not happened since the 2007-2008 financial crisis and the Great


Recession

after. The technology and communications sectors are the second and third worst performers of 11 in the S&P 500 this year.

While investors have shifted their attention and money to sectors like energy and financials, the economy continues to grow at a healthy pace and traders may want to make sure they don’t just play defense or prepare for interest rate hikes.

This week, RBC updated its list of favorite small-cap growth stocks, highlighting a part of the market that investors seem particularly wary of. Small companies generally fare worse than large ones, as they are considered riskier investments in a volatile and uncertain market. While the large-cap S&P 500 is down 9% year-to-date, the Russell 2000, comprised of smaller stocks, is down 11%. Small caps caught up in February to narrow what was previously a wider gap.

RBC’s global research unit writes that its preferred investments in this space are particularly stable.

“The list is an opportunity to highlight companies that have either an attractive normalized growth history or strong sustainable growth characteristics,” the company’s latest report says.

What follows is a list of 21 small companies – most with a market valuation of $5 billion or less – that RBC expects to continue growing for a long time to come. They are ranked from lowest to highest based on the upside potential RBC analysts believe they have over the next 12 months, as evidenced by their price targets.

All figures were calculated based on Thursday’s closing prices.

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