Small-cap stocks can deliver explosive gains — or sizable losses. Choose well, and these high-risk yet potentially high-reward stocks can deliver multibagger returns and turbocharge your portfolio’s overall performance. But choose poorly, and a small-cap stock can produce painful losses, up to and including a complete loss of capital should the business be forced into bankruptcy.
That’s why it’s so important to invest in only the strongest of these companies — those that possess the best business models and enjoy the largest growth opportunities. In this regard, here’s one of the most intriguing small-cap stocks available in the market today.
Top Oil Stocks To Buy For 2019: Express-1 Expedited Solutions Inc.(XPO)
One way to give your business a competitive edge is to make your services indispensable to your customers. XPO Logistics is creating an aura of invincibility for itself by making its logistics and transportation services a critical component of the survival of its retail customers.
XPO recently launched XPO Direct, a service that will put small and medium-sized businesses — and even large ones — on an equal footing with the retail giants. One of the advantages Walmart and Amazon.com have over their rivals is scale. Their far-flung operations allow them to be within hours of their customers, meaning they can deliver products to a customer’s doorstep almost without thinking.
XPO Logistics is leveling the playing field by allowing retailers to use its warehouses, trucks, and logistics services to gain a comparable reach. If a retailer had to build out its own network of stores and distribution centers, the cost would likely be more than it’s worth as the capital expenditures would result in higher prices. By sharing its facilities and capabilities, XPO becomes essential to the retailer’s survival in the hyper-competitive environment.
That’s but one service XPO Logistics has launched and is building on its record of growth. Analysts expect the global intermodal freight transportation market to grow at a compounded annual rate of 16.4% through 2019, hitting $26.2 billion. XPO’s first-quarter revenue surged over 18%, with organic growth in the last-mile segment hitting 15%.
At 24 times Wall Street’s expected earnings for 2018, XPO Logistics might appear pricey, but it is the industry leader. Considering it trades at only 15 times the free cash flow it produces, while not a bargain-basement stock, it’s attractively valued and could be considered as a long-term holding in any portfolio.
Top Oil Stocks To Buy For 2019: BlackBerry Limited(BB)
BlackBerry controlled about a fifth of the world’s smartphone market in 2009. But it eventually lost the entire market to iPhones and Android devices. By the time John Chen became BlackBerry’s CEO in 2013, it controlled less than 1% of the market
Rather than attempt a comeback in smartphones, Chen expanded BlackBerry’s enterprise software, services, and licensing businesses. Its core growth engine became BlackBerry Enterprise Service (BES), which lets companies secure and monitor their employees’ mobile devices.
In 2016, BlackBerry stopped manufacturing its own smartphones, and licensed its brand to Chinese smartphone maker TCL, which created a new subsidiary called BlackBerry Mobile. TCL pays BlackBerry licensing fees, a high-margin revenue stream that complements its software and services revenues.
Last year, BlackBerry’s software and services revenue (which includes its licensing fees) rose 20% and accounted for 80% of its top line. Unfortunately, that growth was offset by its declining handset sales and service access fees, and BlackBerry’s total revenue slid 29%. But as its handset and service access revenue drops toward zero, the growth of its software and services should gradually offset those losses.
Wall Street expects BlackBerry’s revenue to fall just 8% this year, and rebound 10% next year. Its earnings are also expected to grow again as its revenue rises. BlackBerry’s growth and valuations look messy now, but I think investors could warm up to this humbled tech giant again over the next decade — and its stock could eventually double.
Top Oil Stocks To Buy For 2019: Domtar Corporation(UFS)
Domtar Corp (NYSE:UFS) manufactures and distributes a wide array of fiber-based products including communication papers, specialty and packaging papers and adult incontinence products. Domtar also owns and operates an extensive network of strategically located paper and printing supplies distribution facilities. The stock currently has a Zacks Rank #1 and a Value Score of B. It has a 3–5 year EPS growth rate of 5%.
Top Oil Stocks To Buy For 2019: Altria Group(MO)
Owning a tobacco stock may not be right for everyone, but government regulation has effectively closed the U.S. market to new competition. Which has provided Altria and its tobacco brands, including iconic Marlboro, a huge advantage in an industry facing a slow and steady decline. With roughly 50% market share in cigarettes and smokeless tobacco products, Altria has a virtual monopoly in the markets it serves.
Altria has been using its dominant market position to return value to shareholders via stock buybacks and a big dividend (the company targets an 80% of adjusted earnings payout ratio). The hefty 5% yield, however, is backed by 49 years of consecutive annual dividend hikes, so this is no fly by-night company using a fat dividend to lure in investors. How has Altria managed to keep pushing sales results, and dividends, higher? Because of the nature of its products and the lack of new competition Altria has been able to increase the prices it charges over time, more than offsetting the impact from slowly declining demand.
DATA SOURCE: MO REVENUE (ANNUAL) DATA BY YCHARTS.
Altria is, effectively, a cash cow investment. That said, it isn’t waiting for its business to simply die off (something that will likely take decades to happen, by the way). It is also investing in new technology like vaping and burnless tobacco products (its iQOS line). Investments like these should help to extend the company’s dominant market position as it leverages its leading brand names in new areas.
If you can’t handle a so-called "sin" stock, don’t buy Altria. But it certainly has a virtual monopoly on U.S. tobacco and is using that to reward investors with big dividends.
Top Oil Stocks To Buy For 2019: Yext, Inc.(YEXT)
Last, but certainly not least, put Yext Inc (NYSE:YEXT) on your list of artificial intelligence stocks worth a look.
The short version of a long story: While many AI developers are proverbially swinging for the fences in hopes of a payoff down the road, Yext is creating practical AI-driven services here and now. Specifically, Yext has developed ways to turn the mountains of data most companies are now collecting into actionable intelligence.
At first glance, it might not even look like true artificial intelligence. It may look and feel more like a well-planned means of repackaging information that already exists in a difficult-to-use format. Take a closer look, though, and one can see that its platform understands certain contexts and its AI-powered chatbot for use by client companies wouldn’t function properly just using a mere script.
Sexy? Not in the least. What is sexy, however, is the 32% revenue growth forecasted for this year with the same growth rate expected next year. Clearly the company’s doing something right.