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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 +1.45% , the S&P 400 Mid Cap Index /zigman2/quotes/210599897/delayed MID +3.31%  and the S&P Small Cap 600 Index /zigman2/quotes/210599868/delayed SML +5.11%  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 +5.19% .

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
2,789.82
+39.84 +1.45%
Volume: 4.36B
April 9, 2020 5:15p
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/zigman2/quotes/210599897/delayed
US : S&P US
1,586.37
+50.86 +3.31%
Volume: 854.27M
April 9, 2020 5:15p
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/zigman2/quotes/210599868/delayed
US : S&P US
743.23
+36.15 +5.11%
Volume: 1.02B
April 9, 2020 5:15p
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/zigman2/quotes/208653303/composite
US : U.S.: NYSE Arca
$ 61.02
+3.01 +5.19%
Volume: 9.65M
April 9, 2020 4:10p
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/zigman2/quotes/209715792/composite
US : U.S.: NYSE
$ 0.28
+0.02 +8.27%
Volume: 2.98M
April 9, 2020 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$32.69 million
Rev. per Employee
$344,405
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/zigman2/quotes/209591999/composite
US : U.S.: Nasdaq
$ 13.89
+1.13 +8.86%
Volume: 1.23M
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$758.70 million
Rev. per Employee
$242,315
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/zigman2/quotes/205199409/composite
US : U.S.: Nasdaq
$ 2.73
+0.21 +8.33%
Volume: 1.15M
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$262.22 million
Rev. per Employee
$465,247
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/zigman2/quotes/203476774/composite
US : U.S.: NYSE American
$ 0.65
+0.02 +2.73%
Volume: 1.75M
April 9, 2020 4:10p
P/E Ratio
1.12
Dividend Yield
N/A
Market Cap
$42.83 million
Rev. per Employee
$2.86M
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/zigman2/quotes/202777853/composite
US : U.S.: Nasdaq
$ 9.05
-0.35 -3.72%
Volume: 2.44M
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$934.63 million
Rev. per Employee
$2.34M
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/zigman2/quotes/201220766/composite
US : U.S.: Nasdaq
$ 53.07
+4.56 +9.40%
Volume: 288,229
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.09 billion
Rev. per Employee
$214,569
loading...
/zigman2/quotes/201917664/composite
US : U.S.: NYSE
$ 0.51
+0.02 +4.37%
Volume: 66.42M
April 9, 2020 4:10p
P/E Ratio
2.03
Dividend Yield
N/A
Market Cap
$194.10 million
Rev. per Employee
$2.70M
loading...
/zigman2/quotes/205347853/composite
US : U.S.: Nasdaq
$ 33.68
+2.19 +6.95%
Volume: 551,915
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.17 billion
Rev. per Employee
$1.14M
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/zigman2/quotes/202535084/composite
US : U.S.: Nasdaq
$ 29.49
+2.11 +7.71%
Volume: 847,749
April 9, 2020 4:00p
P/E Ratio
22.79
Dividend Yield
N/A
Market Cap
$984.31 million
Rev. per Employee
$235,461
loading...
/zigman2/quotes/207492840/composite
US : U.S.: Nasdaq
$ 23.44
-0.06 -0.26%
Volume: 633,754
April 9, 2020 4:00p
P/E Ratio
2.83
Dividend Yield
N/A
Market Cap
$916.83 million
Rev. per Employee
$3.13M
loading...
/zigman2/quotes/208773703/composite
US : U.S.: NYSE
$ 5.49
+1.19 +27.67%
Volume: 1.03M
April 9, 2020 4:10p
P/E Ratio
1.98
Dividend Yield
N/A
Market Cap
$111.93 million
Rev. per Employee
$863,038
loading...
/zigman2/quotes/206867288/composite
US : U.S.: NYSE
$ 3.93
+0.09 +2.34%
Volume: 2.01M
April 9, 2020 4:10p
P/E Ratio
5.78
Dividend Yield
14.76%
Market Cap
$587.02 million
Rev. per Employee
$532,024
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/zigman2/quotes/203319837/composite
US : U.S.: NYSE
$ 15.85
+0.88 +5.88%
Volume: 475,685
April 9, 2020 4:10p
P/E Ratio
15.52
Dividend Yield
N/A
Market Cap
$471.59 million
Rev. per Employee
$914,675
loading...
/zigman2/quotes/201350452/composite
US : U.S.: Nasdaq
$ 24.84
+2.14 +9.43%
Volume: 1.75M
April 9, 2020 4:00p
P/E Ratio
5.23
Dividend Yield
0.00%
Market Cap
$330.16 million
Rev. per Employee
$103,641
loading...
/zigman2/quotes/200231910/composite
US : U.S.: Nasdaq
$ 6.50
+0.25 +4.00%
Volume: 1.49M
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$302.71 million
Rev. per Employee
$1.21M
loading...
/zigman2/quotes/201429622/composite
US : U.S.: Nasdaq
$ 15.59
-1.45 -8.51%
Volume: 253,118
April 9, 2020 4:00p
P/E Ratio
71.38
Dividend Yield
N/A
Market Cap
$686.22 million
Rev. per Employee
$290,000
loading...
/zigman2/quotes/209006405/composite
US : U.S.: NYSE
$ 19.91
+1.29 +6.93%
Volume: 235,918
April 9, 2020 4:10p
P/E Ratio
446.41
Dividend Yield
N/A
Market Cap
$701.60 million
Rev. per Employee
$238,946
loading...
/zigman2/quotes/204775795/composite
US : U.S.: Nasdaq
$ 4.49
0.00 0.00%
Volume: 597,026
April 9, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$157.37 million
Rev. per Employee
$3.20M
loading...
/zigman2/quotes/208967974/composite
US : U.S.: NYSE
$ 1.11
+0.16 +16.65%
Volume: 2.08M
April 9, 2020 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$85.55 million
Rev. per Employee
$378,619
loading...
/zigman2/quotes/209042948/composite
US : U.S.: NYSE
$ 6.78
-0.11 -1.60%
Volume: 929,745
April 9, 2020 4:10p
P/E Ratio
6.35
Dividend Yield
N/A
Market Cap
$373.47 million
Rev. per Employee
$2.38M
loading...

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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