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Dec. 12, 2019, 10:42 p.m. EST

Top stock picks for 2020: Standout small companies

Many are volatile, but the small-cap index produces high returns over time

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By Philip van Doorn, MarketWatch


Tetra Technologies
Analysts expect shares of Tetra Technologies to bounce back next year after a 25% slide in 2019.

(This is the third in a three-part series listing highly rated stocks that sell-side analysts expect to rise the most over the next 12 months. <CROSSREF GUID="{4FF7972E-1B55-11EA-B04C-1B10A314783E}" DOCTYPEID="" FILE-NAME="" ENCODING-DATE="">Part 1</CROSSREF> covers large-cap stocks, and <CROSSREF GUID="{DC0E5C8C-1B89-11EA-B04C-1B10A314783E}" DOCTYPEID="" FILE-NAME="" ENCODING-DATE="">part 2</CROSSREF> covers mid-cap stocks.)

Small-cap stocks are always an exciting part of the market.

For newer companies, management teams are motivated to grow their businesses rapidly, which means greater opportunity — and more volatility. As the U.S. economy continues to chug along, with transformations in energy and so many tech-related industries, exposure to this sector is critical for a diversified long-term growth portfolio.

So how have the small-caps performed? As we saw in part 2 of this series, “winners” among the large-cap S&P 500 /zigman2/quotes/210599714/realtime SPX +0.36% , the S&P 400 Mid Cap Index /zigman2/quotes/219506813/composite MID -0.35%  and the S&P Small Cap 600 Index /zigman2/quotes/210599868/delayed SML +0.56%  vary over time. Here’s a comparison of total returns (with dividends reinvested) for the indexes over various periods through Dec. 9:

Index 2019 3 years 5 years 10 years 15 years 20 years
S&P 500 28% 47% 69% 252% 260% 228%
S&P Mid Cap 400 23% 25% 51% 237% 293% 536%
S&P Small Cap 600 20% 22% 56% 261% 279% 577%
Source: FactSet

In recent years, the S&P 500 — heavily weighted to the largest U.S. tech companies — has been the leader. But small-caps are in the lead for 10- and 20-year returns.

There are many ways to play small-caps as a group, including low-cost index funds, such as the iShares Core S&P Small-Cap ETF /zigman2/quotes/208653303/composite IJR +0.58% .

Wall Street’s favorites among the S&P 600

Here are the 20 S&P Small Cap 600 stocks covered by at least five sell-side analysts with 75% or more “buy” or equivalent ratings that have the highest 12-month upside potential implied by consensus price targets:

Company Ticker Share 'buy' ratings Share neutral ratings Share 'sell' ratings Closing price - Dec. 9 Consensus price target Implied 12-month upside potential Total return - 2019 through Dec. 9
Tetra Technologies Inc. /zigman2/quotes/209715792/composite TTI 78% 22% 0% $1.26 $3.19 153% -25%
Cytokinetics Inc. /zigman2/quotes/209591999/composite CYTK 83% 17% 0% $9.63 $22.00 128% 52%
Spectrum Pharmaceuticals Inc. /zigman2/quotes/205199409/composite SPPI 100% 0% 0% $10.29 $23.20 125% 18%
Ring Energy Inc. /zigman2/quotes/203476774/composite REI 75% 25% 0% $2.05 $4.16 103% -60%
PDC Energy Inc. /zigman2/quotes/202777853/composite PDCE 82% 18% 0% $23.28 $43.44 87% -22%
Tabula Rasa Healthcare Inc. /zigman2/quotes/201220766/composite TRHC 78% 22% 0% $40.38 $74.14 84% -37%
Callon Petroleum Co. /zigman2/quotes/201917664/composite CPE 87% 13% 0% $4.26 $7.70 81% -34%
Regenxbio Inc. /zigman2/quotes/205347853/composite RGNX 83% 17% 0% $42.71 $75.67 77% 2%
Chart Industries Inc. /zigman2/quotes/202535084/composite GTLS 92% 8% 0% $55.99 $91.75 64% -14%
Renewable Energy Group Inc. /zigman2/quotes/207492840/composite REGI 100% 0% 0% $18.18 $28.80 58% -29%
Consol Energy Inc. /zigman2/quotes/208773703/composite CEIX 80% 20% 0% $13.34 $21.00 57% -58%
Archrock Inc. /zigman2/quotes/206867288/composite AROC 83% 17% 0% $8.93 $13.92 56% 26%
Enova International Inc. /zigman2/quotes/203319837/composite ENVA 100% 0% 0% $23.30 $36.20 55% 20%
Children's Place Inc. /zigman2/quotes/201350452/composite PLCE 75% 25% 0% $69.90 $107.63 54% -21%
Tivity Health Inc. /zigman2/quotes/200231910/composite TVTY 100% 0% 0% $20.23 $31.14 54% -18%
OneSpan Inc. /zigman2/quotes/201429622/composite OSPN 80% 20% 0% $17.14 $24.40 42% 32%
CryoLife Inc. /zigman2/quotes/209006405/composite CRY 100% 0% 0% $24.21 $34.33 42% -15%
Green Plains Inc. /zigman2/quotes/204775795/composite GPRE 80% 20% 0% $14.22 $20.00 41% 10%
Newpark Resources Inc. /zigman2/quotes/208967974/composite NR 83% 17% 0% $5.80 $7.80 34% -16%
Talos Energy Inc. /zigman2/quotes/209042948/composite TALO 100% 0% 0% $25.42 $34.17 34% 56%
Source: FactSet

You can click on the tickers for more about each company.

Of 20 stocks on the list, 12 have suffered double-digit declines this year. It is not unusual to see this sort of action among a group of highly rated stocks with high price targets. It follows the trend for large-cap and mid-cap stocks. Mark Hulbert explained that the worst stocks in a given year tend to rebound the following year.

Don’t miss: These are the 20 best-performing stocks of the past decade, and some of them will surprise you

<STRONG>Create an email alert for Philip van Doorn’s Deep Dive columns <INTERNAL-PAGE URL="/tools/alerts/newsColumn.asp">here</INTERNAL-PAGE>.</STRONG>

/zigman2/quotes/210599714/realtime
US : S&P US
3,306.51
+11.90 +0.36%
Volume: 2.40B
Aug. 4, 2020 5:20p
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/zigman2/quotes/219506813/composite
US : U.S.: NYSE Arca
$ 41.98
-0.15 -0.35%
Volume: 412.00
Aug. 4, 2020 2:32p
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/zigman2/quotes/210599868/delayed
US : S&P US
881.14
+4.95 +0.56%
Volume: 491.54M
Aug. 4, 2020 5:20p
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/zigman2/quotes/208653303/composite
US : U.S.: NYSE Arca
$ 72.44
+0.42 +0.58%
Volume: 3.55M
Aug. 4, 2020 4:00p
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/zigman2/quotes/209715792/composite
US : U.S.: NYSE
$ 0.73
+0.02 +3.49%
Volume: 4.04M
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$89.39 million
Rev. per Employee
$344,405
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/zigman2/quotes/209591999/composite
US : U.S.: Nasdaq
$ 22.02
-0.64 -2.82%
Volume: 806,051
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.54 billion
Rev. per Employee
$242,315
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/zigman2/quotes/205199409/composite
US : U.S.: Nasdaq
$ 3.39
+0.23 +7.28%
Volume: 4.56M
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$441.42 million
Rev. per Employee
$465,247
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/zigman2/quotes/203476774/composite
US : U.S.: NYSE American
$ 1.15
+0.01 +0.88%
Volume: 651,452
Aug. 4, 2020 4:00p
P/E Ratio
1.10
Dividend Yield
N/A
Market Cap
$77.52 million
Rev. per Employee
$2.86M
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/zigman2/quotes/202777853/composite
US : U.S.: Nasdaq
$ 14.92
+0.44 +3.04%
Volume: 823,445
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.44 billion
Rev. per Employee
$2.34M
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/zigman2/quotes/201220766/composite
US : U.S.: Nasdaq
$ 52.37
-3.36 -6.03%
Volume: 610,091
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.28 billion
Rev. per Employee
$214,569
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/zigman2/quotes/201917664/composite
US : U.S.: NYSE
$ 1.28
+0.10 +8.47%
Volume: 25.08M
Aug. 4, 2020 4:00p
P/E Ratio
1.44
Dividend Yield
N/A
Market Cap
$468.46 million
Rev. per Employee
$2.70M
loading...
/zigman2/quotes/205347853/composite
US : U.S.: Nasdaq
$ 33.74
-0.59 -1.72%
Volume: 330,900
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.28 billion
Rev. per Employee
$1.14M
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/zigman2/quotes/202535084/composite
US : U.S.: Nasdaq
$ 71.55
+1.63 +2.33%
Volume: 252,548
Aug. 4, 2020 4:00p
P/E Ratio
43.16
Dividend Yield
N/A
Market Cap
$2.52 billion
Rev. per Employee
$235,461
loading...
/zigman2/quotes/207492840/composite
US : U.S.: Nasdaq
$ 28.68
+0.25 +0.88%
Volume: 502,869
Aug. 4, 2020 4:00p
P/E Ratio
2.57
Dividend Yield
N/A
Market Cap
$1.11 billion
Rev. per Employee
$3.13M
loading...
/zigman2/quotes/208773703/composite
US : U.S.: NYSE
$ 5.52
-0.28 -4.83%
Volume: 348,584
Aug. 4, 2020 4:00p
P/E Ratio
2.36
Dividend Yield
N/A
Market Cap
$150.97 million
Rev. per Employee
$863,038
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/zigman2/quotes/206867288/composite
US : U.S.: NYSE
$ 7.10
+0.18 +2.60%
Volume: 741,551
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
8.17%
Market Cap
$1.06 billion
Rev. per Employee
$532,024
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/zigman2/quotes/203319837/composite
US : U.S.: NYSE
$ 16.19
+0.02 +0.12%
Volume: 364,094
Aug. 4, 2020 4:00p
P/E Ratio
15.79
Dividend Yield
N/A
Market Cap
$486.87 million
Rev. per Employee
$914,675
loading...
/zigman2/quotes/201350452/composite
US : U.S.: Nasdaq
$ 26.09
+1.95 +8.08%
Volume: 939,649
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$352.10 million
Rev. per Employee
$103,641
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/zigman2/quotes/200231910/composite
US : U.S.: Nasdaq
$ 13.65
+0.17 +1.26%
Volume: 832,269
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$653.59 million
Rev. per Employee
$1.21M
loading...
/zigman2/quotes/201429622/composite
US : U.S.: Nasdaq
$ 32.50
-0.46 -1.40%
Volume: 479,838
Aug. 4, 2020 4:00p
P/E Ratio
89.66
Dividend Yield
N/A
Market Cap
$1.33 billion
Rev. per Employee
$290,000
loading...
/zigman2/quotes/209006405/composite
US : U.S.: NYSE
$ 20.00
-0.20 -0.99%
Volume: 219,024
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$764.73 million
Rev. per Employee
$238,946
loading...
/zigman2/quotes/204775795/composite
US : U.S.: Nasdaq
$ 13.20
+0.29 +2.25%
Volume: 688,385
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$458.23 million
Rev. per Employee
$3.20M
loading...
/zigman2/quotes/208967974/composite
US : U.S.: NYSE
$ 1.89
-0.10 -5.03%
Volume: 1.22M
Aug. 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$178.90 million
Rev. per Employee
$378,619
loading...
/zigman2/quotes/209042948/composite
US : U.S.: NYSE
$ 7.52
+0.55 +7.89%
Volume: 725,329
Aug. 4, 2020 4:00p
P/E Ratio
1.30
Dividend Yield
N/A
Market Cap
$455.44 million
Rev. per Employee
$2.38M
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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