We recently compiled a list of the 10 Cash-Rich Small Cap Stocks To Invest In According To Analysts. In this article, we are going to take a look at where CONMED Corporation (NYSE:CNMD) stands against the other cash-rich small cap stocks.
Small-cap stocks in the US have been under pressure, with the Russell small cap index falling 10% from its November highs as of January 2025. In contrast, the S&P index, which tracks large-cap stocks, declined by less than 3% during the same period. President Trump’s focus on domestic economic growth could make small-cap stocks more attractive. However, the prospect of higher interest rates has become a major hurdle. Rising borrowing costs tend to impact smaller companies more than larger ones. Keith Lerner, co-chief investment officer at Truist Advisory Services, described this as a “tug of war” – where strong economic growth could benefit small caps, but higher rates work against them.
Market sentiment toward small caps has weakened due to expectations of fewer interest rate cuts, especially after the Federal Reserve raised its inflation forecast for 2025. Despite this, some experts believe small businesses could benefit from Trump’s policies, particularly reduced regulations and support for domestic industries. Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, pointed out that small companies are more US-focused than multinational corporations. However, Trump’s approach to tariffs could create challenges by disrupting supply chains, which may hurt smaller businesses too.
After years of trailing behind large-cap stocks, small caps finally seem ready for a comeback, according to RBC Wealth Management. Over the past five years, major economic and global events, such as pandemic-led lockdowns, economic rebounds, government stimulus, inflation, rising interest rates, and the rapid rise of AI, have widened the gap between small and large-cap stock performance. Large-cap stocks have delivered solid returns in four of the last five years, leaving small caps struggling to keep up. Historically, factors such as mergers and acquisitions and initial public offerings have played a key role in small-cap growth, but IPO activity in the small-cap space has been weak.
Although 2024 saw some improvement, with an average of 31 IPOs per quarter and $7 billion in total value, these numbers are still below pre-pandemic levels. That said, signs of a recovery started to emerge toward the end of 2024. Looking ahead, 2025 may be a turning point for small caps, as per RBC’s report. The Federal Reserve’s move toward lower interest rates could encourage businesses to take more risks, boosting M&A and IPO activity. As conditions improve, small caps could start closing the gap with large caps. Lower rates, increased corporate expansion, stronger market activity, and a more supportive regulatory environment could fuel small-cap growth. In addition, with large caps becoming expensive and investor expectations rising, more investors may look toward undervalued small-cap stocks for better opportunities.
Our Methodology
For this article, we used the Finviz stock screener to find small-cap stocks with strong cash reserves. We filtered for companies with market caps between $300 million and $2 billion and a current ratio (CR) above 2, which indicates they have more assets than liabilities, due to high cash reserves, receivables, or inventory. After that, we manually looked for companies with a trailing twelve-month (TTM) operating cash flow of over $50 million as of December 31, 2024. From there, we picked 10 stocks with the highest cash reserves. These stocks also had an average upside potential of more than 20% based on Wall Street analyst estimates as of March 4. We included hedge fund sentiment as of Q4 2024 as well. Below, we have ranked the list in ascending order of upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Closeup portrait of a surgeon wearing a surgical mask and gown while holding a surgical device.
CONMED Corporation (NYSE:CNMD)
TTM Operating Cash Flow as of December 31, 2024: $166,968,000
Number of Hedge Fund Holders: 22
Average Upside Potential: 30.66%
CONMED Corporation (NYSE:CNMD) is a medical technology company that designs, develops, and markets surgical devices and equipment in the US and globally. It provides a wide range of orthopedic surgery products. On March 3, the company disclosed that Fisher Asset Management increased its stake in the company by 41.4% during the fourth quarter. The fund added 122,140 shares to its portfolio, bringing its total ownership to 417,430 shares. It is ranked 8th on our list of the best cash rich stocks.
CONMED Corporation (NYSE:CNMD) reported GAAP net income of $33.8 million for the fourth quarter, up from $33.1 million in the same period last year. After adjusting for special items, Q4 net income rose 26.2% year-over-year to $41.8 million. For the full year, revenue reached $1.307 billion, reflecting a 5% increase. While overall sales growth in 2024 fell short of expectations, the company improved profitability through a better product mix and improved cost management. Operating cash flow for the year surged 33.2% to $167 million, compared to $125.3 million in 2023, with adjusted EPS growing 20.9%. Despite supply challenges, the firm strengthened its cash flow and positioned itself for long-term stability.
As per Insider Monkey’s fourth quarter database, 22 hedge funds were bullish on CONMED Corporation (NYSE:CNMD), up from 19 funds in the last quarter. James E. Flynn’s Deerfield Management was the largest shareholder of the firm, with 611,964 shares worth nearly $42 million.
Overall CNMD ranks 8th on our list of the best cash-rich small cap stocks to buy. While we acknowledge the potential of CNMD as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CNMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
