How Do You Find Good Microcap Stocks?
It’s tricky to screen for microcaps while using the Zacks Rank because that implies that there is at least 1 analyst covering the company.
But not many analysts cover the microcap stocks.
Additionally, you then need other solid fundamentals like earnings growth.
We don’t want to buy just any microcap. We want the best.
A micro-cap is a publicly-traded company in the United States that has a market capitalization between approximately $50 million and $300 million. Micro-cap companies have greater market capitalization than nano caps, and less than small-, mid-, large- and mega-cap corporations.
Welcome to Episode #129 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
Small cap value stocks have historically been one of the best areas to invest but in the last 5 years, they have underperformed.
The S&P 600 Value ETF has returned just 18% over the last 5 years compared to 49.5% in the S&P 500 and 73.9% in the NASDAQ.
But that could mean an opportunity to stock up in both small, and even smaller, i.e. “microcap” stocks.
The definition of microcap can be different for each investor. It can range from as low as $50 million to $200 or $300 million.
For the purposes of this podcast, a market cap of $500 million or less was used in order to get a larger choice of stocks.
Screening for Microcap Stocks
In this screen, we looked for stocks with a market cap under $500 million, a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and a PEG ratio of under 1.0.
The PEG should hopefully provide both growth and value while the Zacks Rank should provide rising earnings estimates.
This screen returned just 12 stocks.
5 Cheap Microcap Stocks