The small-cap space provides some exciting opportunities for robust returns in quick time. Further, some quality small-cap stock rallies are backed by fundamentals and positive business catalysts. This column discusses three small-cap stocks for 100% returns before the end of the year. Like always, I have steered clear of purely speculative ideas. The businesses discussed have the potential to deliver in the near term as well as the long term.
Additionally, small-cap stocks, by definition, have a market capitalization ranging from $250 million to $2 billion. In this column, my focus is on ideas with a market valuation of $1.5 billion or higher. I have, therefore, avoided the smaller names with relatively higher risk.
From a broad market perspective, I must mention that rate cuts seem likely in 2024. That will be positive for the markets, and small-cap stocks tend to perform well during times of easy money policies. Therefore, besides company-specific fundamentals, that is another catalyst for robust returns from these small-cap stocks.
Borr Drilling (BORR)
Borr Drilling (NYSE:BORR) stock has been depressed and has trended lower by 10% in the last 12 months because of relatively lower oil prices on the back of macroeconomic concerns. With BORR stock trading at a forward price-earnings ratio of 9, it’s a good time to accumulate.
The first reason to be bullish on Borr is the possibility of rate cuts in the second half of 2024. Expansionary policies are likely to support GDP growth, and oil can potentially trend higher. Further, factors of production cut by OPEC and geopolitical tensions will ensure that oil remains firm.
The second reason to be bullish on Borr is a strong contract backlog. As of December 2023, Borr reported an order backlog of $1.75 billion. That provides clear revenue and cash flow visibility. It’s worth noting that Borr reported adjusted EBITDA of $351 million last year. For the current year, the company guided for an adjusted EBITDA of $500 to $550 million.
As oil trends higher, the order intake is likely to remain robust. Therefore, growth will likely remain healthy beyond 2025. With these positives, it’s a matter of time before BORR stock surges.
Archer Aviation (ACHR)
Archer Aviation (NYSE:ACHR) is another name among small-cap stocks for 100% returns. From 52-week highs of $7.49, ACHR stock has witnessed significant correction and trades at $4.8. That seems like a golden accumulation opportunity with the company on track for commercialization of eVTOL aircraft in 2025.
In 2024, Archer is targeting completion of certification and the construction of its manufacturing facility. The facility in Georgia will likely support the production of 650 aircraft annually. It’s worth noting that Archer already has an order backlog of $3.5 billion. Therefore, the company is positioned for healthy growth in 2025 and beyond.
I must also add that Archer is initiating commercial operations in the United States, UAE and India by 2026. The company will likely expand into newer territories in the coming quarters. That will help further boost the order backlog.
Overall, the flying car industry is in a nascent stage and Archer Aviation is among the early movers. I expect massive value creation from the stock in the coming years.
IAMGOLD (IAG)
Gold has been trending higher on hopes of rate cuts in the second half of 2024. I expect the precious metal to remain in an uptrend, with the breakout coming after an extended period of consolidation. It’s, therefore, a good time to remain invested in gold mining stocks.
IAMGOLD (NYSE:IAG) stock looks attractive at current levels of $3.09, and I expect a big rally in the coming months. The obvious reason to be bullish is a higher realized gold price that will translate into upside for revenue and cash flows.
Further, IAMGOLD is also positioned for healthy production growth this year. The reason is the commencement of production from the Côté Gold asset, which has the potential to become the third-largest gold mine in Canada.
To put things into perspective. IAMGOLD reported gold production of 465,000 ounces last year. Côté Gold alone is likely to deliver production of 220,000 to 290,000 ounces this year. Therefore, higher realized gold prices and healthy production growth will translate into stellar financials.
On the date of publication, Faisal Humayun did not hold (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.
