4 Value Small Cap Stocks That Could Go Parabolic - Latest Global News

4 Value Small Cap Stocks That Could Go Parabolic

Speculation about interest rate cuts is at an all-time high and investors are closely watching the Federal Reserve’s actions. While the exact timing and number of rate cuts remains uncertain, it is widely expected that the Fed will eventually cut rates to maintain economic stability.

As we approach this potential catalyst, I will examine how investors can best position themselves in the market.

A hand drawing a parabolic curve.

Image source: Getty Images.

The small-cap growth dilemma

Small-cap growth stocks have faced challenges due to high interest rates. Many of these companies rely on debt for financing, which becomes more expensive when interest rates rise.

As a result, some small-cap stocks are currently trading at negative company values ​​- a rare occurrence. Although it is difficult to predict how these stocks will react to interest rate cuts, a likely outcome is a broad rally in this segment of stocks.

Identification of potential winners

Here are four small-cap value stocks that could rally strongly in response to interest rate cuts later in 2024 or early 2025. For this article, I’m defining small-cap stocks as those with a market cap under $6 billion (a slightly different criteria than the textbook). definition, but one used by first-class indexes like the CRSP US Small Cap Value Index).

Four small-cap growth stocks to keep an eye on

1. Archer Aviation

Archer Aviation (NYSE:ACHR) focuses on electric vertical takeoff and landing (eVTOL) aircraft. As urban air mobility gains traction, Archer’s innovative technology could position the company for significant growth.

The stock has fallen 37% since the start of the year. However, the company expects several key catalysts that could soon trigger a recovery.

2. Joby Aviation

Joby Aviation (NYSE:JOBY) is another eVTOL player. With a focus on air taxi services, the company wants to revolutionize short-haul transport. Rate cuts could boost investor confidence in this sector, and as one of the best-capitalized players in this space, Joby is an interesting speculative buy.

More specifically, Joby is targeting a potential trillion-dollar business opportunity. The eVTOL market is expected to be extremely competitive, but Joby is one of the frontrunners that could be among the first to market.

3. Ginkgo Bioworks

Ginkgo Bioworks (NYSE:DNA) specializes in synthetic biology and genetic engineering. As biotech recovers in anticipation of a friendly capital raising environment, Ginkgo’s unique approach to creating tailored organisms could pay dividends for patient shareholders. However, Ginkgo shares have lost 92% of their value since their stock market debut, underscoring the high-risk nature of this emerging biotech platform.

DNA diagramDNA diagram

DNA diagram

4. Iovance Therapeutics

Iovance Therapeutics (NASDAQ:IOVA) The focus is on cancer immunotherapies, with a particular emphasis on tumor-infiltrating lymphocyte therapies. Earlier this year, Iovance received breakthrough regulatory approval from the Food and Drug Administration for Amtagvi to treat certain forms of advanced melanoma.

Because it typically takes a few years for novel therapies to come to market, some investors have found themselves sidelined following this regulatory approval. That means Iovance shares are down about 11% in the last 30 days. An improving financing landscape and growing Amtagvi sales could trigger a turnaround.

IOVA diagramIOVA diagram

IOVA diagram

Final thoughts

While no investment is risk-free, these small-cap value stocks offer intriguing opportunities. However, investors should consider buying baskets of these stocks or even a thematic exchange-traded fund (ETF) in the small-cap growth or value space.

After all, small caps are known for their sometimes extreme volatility. Additionally, individual small cap stocks may underperform over extended periods of time, which may negatively impact your portfolio’s annual performance.

Should you invest $1,000 in Archer Aviation now?

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George Budwell holds positions at Archer Aviation. The Motley Fool has positions in and recommends Iovance Biotherapeutics. The Motley Fool has a disclosure policy.

“4 Small-Cap Value Stocks That Could Go Parabolic” was originally published by The Motley Fool

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