In this article, we discuss 10 best-performing small-cap stocks of 2022. If you want to see more stocks in this selection, check out 5 Best-Performing Small-Cap Stocks of 2022.
O’Shaughnessy Asset Management demonstrated the relative outperformance of smaller and cheaper stocks over the long-term. The firm conducted a study measuring the annualized excess return of small-cap stocks versus large-caps in a period starting from 1964 through 2017. The results showed that smaller stocks generated an annualized excess return of 5.1% over the 54-year study, while expensive large-cap stocks generated annualized losses of 11.0%. Historical data also suggests that following extreme economic downturns, small-cap value stocks outperformed large-cap growth plays by 16.8% annualized over the next 10 years.
Small-caps benefit the most when an economy is rebounding from a slowdown. When the economy is recovering, unemployment rates rapidly go down, and businesses experience robust earnings growth, making it an ideal time to invest in small-cap stocks. Some of the biggest companies today, such as Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Microsoft Corporation (NASDAQ:MSFT), once traded as small-caps too. The key to successful investing is buying cheap stocks with strong potential before the broader market realizes their value.
Our Methodology
We selected the companies with market capitalization ranging from $300 million to $2 billion that have gained more than 100% year to date. The hedge fund sentiment around the securities was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
We have ranked the list according to the YTD share price gains, from lowest to highest.
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Best-Performing Small-Cap Stocks of 2022
10. Aerie Pharmaceuticals, Inc. (NASDAQ:AERI)
Number of Hedge Fund Holders: 24
YTD Share Price Gain as of October 3: 101.54%
Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) was incorporated in 2005 and is headquartered in Durham, North Carolina. Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) is a pharmaceutical company engaged in the development and commercialization of ophthalmic therapies for open-angle glaucoma, dry eye, diabetic macular edema, and wet age-related macular degeneration in the United States. Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) stock gained 101.54% year-to-date as of October 3, making it one of the best-performing small-cap stocks of 2022.
On August 23, Alcon Inc. (NYSE:ALC) announced that it will acquire Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) in a deal valued at approximately $770 million. The purchase price of $15.25 per share represents a premium of 37% to Aerie Pharmaceuticals, Inc. (NASDAQ:AERI)’s last closing price. The deal is anticipated to close in the fourth quarter of 2022. This deal will solidify Alcon’s existing commercial portfolio in the $20 billion global ophthalmic pharmaceutical market.
Citi analyst Yigal Nochomovitz on August 29 downgraded Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) to Neutral from Buy with a price target of $15.25, up from $14, citing the pending acquisition by Alcon. It is “highly improbable that another bidder would emerge at this stage,” the analyst told investors in a research note.
According to Insider Monkey’s data, 24 hedge funds were bullish on Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) at the end of Q2 2022, up from 21 funds in the prior quarter. James E. Flynn’s Deerfield Management is a notable position holder in the company, with 4.70 million shares worth $35.2 million.
Like Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Microsoft Corporation (NASDAQ:MSFT), Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) is on the radar of elite investors.
9. Tidewater Inc. (NYSE:TDW)
Number of Hedge Fund Holders: 16
YTD Share Price Gain as of October 3: 102.93%
Tidewater Inc. (NYSE:TDW) is a Texas-based company that provides offshore marine support and transportation services to the offshore energy sector through the operation of marine service vessels worldwide. The earnings and revenue in Q2 2022 beat Wall Street estimates, and Average Active Vessels increased from 118 to 172 on a year-over-year basis. Tidewater Inc. (NYSE:TDW) stock gained about 103% year-to-date as of October 3, which is why it made it to our list of the best-performing small-cap stocks of 2022.
On September 6, Evercore ISI analyst James West resumed coverage of Tidewater Inc. (NYSE:TDW) with an Outperform rating and a $42 price target. Tidewater Inc. (NYSE:TDW)’s acquisition of Swire Pacific Offshore created the industry’s largest fleet of OSVs, said the analyst, who sees Tidewater as “one of the biggest beneficiaries” of the offshore oil and gas market being in the initial innings of what he anticipates to be “a long and strong upcycle.”
According to Insider Monkey’s data, 16 hedge funds were long Tidewater Inc. (NYSE:TDW) at the end of June 2022, with collective stakes worth $156.5 million, compared to 14 funds in the earlier quarter worth $148 million. Amit Wadhwaney’s Moerus Capital Management is the largest position holder in the company, with 2.4 million shares valued at $50.85 million.
Here is what Third Avenue Management Small-Cap Value Fund has to say about Tidewater Inc. (NYSE:TDW) in its Q1 2022 investor letter:
“Within the Fund, a rapid rise in oil prices benefitted the investment in oil services company Tidewater (NYSE:TDW), which more than doubled in price last quarter. The time-arbitrage/special-situations bucket is predominantly composed of energy services company Tidewater, and other out of favor, misunderstood companies such as Hamilton Beach Brands. All of these companies are cyclical and currently out of favor, but given their strong financial positions, Fund Management believes they have the luxury of time and capital to invest and grow until the clouds dissipate.”
8. TransMedics Group, Inc. (NASDAQ:TMDX)
Number of Hedge Fund Holders: 13
YTD Share Price Gain as of October 3: 105.50%
Next on our list of the best-performing small-cap stocks of 2022 is TransMedics Group, Inc. (NASDAQ:TMDX), a Massachusetts-based commercial-stage medical technology company which specializes in organ transplant therapy for end-stage organ failure patients in the United States and internationally. TransMedics reported another solid quarterly performance in June 2022, with upside in revenue versus Wall Street estimates. TransMedics Group, Inc. (NASDAQ:TMDX) stock climbed 105.5% year-to-date as of October 3.
On August 2, JPMorgan analyst Allen Gong upgraded TransMedics Group, Inc. (NASDAQ:TMDX) to Overweight from Neutral with a $48 price target. The company reported “another impressive beat-and-raise” in Q2 2022 as momentum across all three organs was sustained by the ongoing success of the National OCS Program, the analyst told investors in a research note. He cited TransMedics Group, Inc. (NASDAQ:TMDX)’s “highly attractive market opportunity, differentiated product offering, and above-peer growth profile” for the upgrade.
Among the hedge funds tracked by Insider Monkey, 13 funds reported owning stakes worth $60.8 million in TransMedics Group, Inc. (NASDAQ:TMDX) at the end of June 2022, up from 5 funds in the prior quarter worth $19.6 million. Richard Driehaus’ Driehaus Capital is the largest position holder in the company, with 614,881 shares worth $19.3 million.
7. CinCor Pharma, Inc. (NASDAQ:CINC)
Number of Hedge Fund Holders: 9
YTD Share Price Gain as of October 3: 112.31%
CinCor Pharma, Inc. (NASDAQ:CINC) was incorporated in 2018 and is based in Waltham, Massachusetts. It is a clinical-stage biopharmaceutical company that develops medicines for the treatment of cardio-renal diseases. On September 28, the company announced that data from the BrigHtn trial demonstrated that its drug, baxdrostat, can potentially be paired with other agents to control high blood pressure in patients whose hypertension is refractory to treatment. As of October 3, CinCor Pharma, Inc. (NASDAQ:CINC) stock has climbed over 112% on a year-to-date basis. It is one of the best-performing small-cap stocks of 2022.
On September 26, LifeSci Capital initiated coverage of CinCor Pharma, Inc. (NASDAQ:CINC) with an Outperform rating and a $64 price target.
According to Insider Monkey’s data, 9 hedge funds were long CinCor Pharma, Inc. (NASDAQ:CINC) at the end of the second quarter of 2022, with collective stakes worth $160 million, compared to 9 funds in the prior quarter worth $130 million. Joseph Edelman’s Perceptive Advisors is the leading stakeholder of the company, with 2.3 million shares worth $43.7 million.
6. NexTier Oilfield Solutions Inc. (NYSE:NEX)
Number of Hedge Fund Holders: 30
YTD Share Price Gain as of October 3: 113.70%
NexTier Oilfield Solutions Inc. (NYSE:NEX) is headquartered in Houston, Texas, providing well completion and production services in multiple active and demanding basins. On August 3, NexTier Oilfield Solutions Inc. (NYSE:NEX) purchased the sand hauling, wellsite storage, and last mile logistics businesses from Continental Intermodal Group for approximately $27 million in cash and 500,000 common shares. The firm now owns all rights and interests in Sandstorm Wellsite Storage Technology as a result of this deal.
On September 26, Morgan Stanley analyst Connor Lynagh downgraded NexTier Oilfield Solutions Inc. (NYSE:NEX) to Equal Weight from Overweight with an unchanged price target of $13. The analyst favors energy services and equipment firms instead of land drillers. The North American services industry has potential to “better delineate capital returns and reinvestment frameworks to prove to the market that another cyclical capacity overbuild is not underway,” the analyst told investors in a research note.
According to Insider Monkey’s Q2 data, 30 hedge funds were long NexTier Oilfield Solutions Inc. (NYSE:NEX), up from 28 funds in the earlier quarter. Stephen Feinberg’s Cerberus Capital Management is the largest stakeholder of the company, with 27.4 million shares worth $247.7 million.
Investors can solidify their portfolio by looking into NexTier Oilfield Solutions Inc. (NYSE:NEX), in addition to Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Aristotle Capital Management Small Cap Equity has to say about NexTier Oilfield Solutions Inc. (NYSE:NEX) in its Q1 2022 investor letter:
“NexTier Oilfield Solutions (NYSE:NEX), a provider of hydraulic fracturing and other completion-oriented oilfield services to exploration and production companies in the U.S., benefited from rising U.S. completion activity and rising prices due to tight supply/demand fundamentals for frac equipment. We maintain a position, as we believe the company’s dedicated service agreements, solid execution and merger synergies from recent mergers and acquisitions activity can unlock additional value for shareholders in periods to come.”
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Disclosure: None. 10 Best-Performing Small-Cap Stocks of 2022 is originally published on Insider Monkey.
