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Philip van Doorn

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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 -1.57% , the S&P 400 Mid Cap Index /zigman2/quotes/210599897/delayed MID -1.41%  and the S&P Small Cap 600 Index /zigman2/quotes/210599868/delayed SML -1.19%  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 -1.10% .

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
3,243.63
-51.84 -1.57%
Volume: 2.12B
Jan. 27, 2020 4:20p
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/zigman2/quotes/210599897/delayed
US : S&P US
2,035.97
-29.18 -1.41%
Volume: 526.24M
Jan. 27, 2020 4:20p
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/zigman2/quotes/210599868/delayed
US : S&P US
1,003.93
-12.05 -1.19%
Volume: 455.36M
Jan. 27, 2020 4:20p
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/zigman2/quotes/208653303/composite
US : U.S.: NYSE Arca
$ 82.51
-0.92 -1.10%
Volume: 3.19M
Jan. 27, 2020 4:10p
loading...
/zigman2/quotes/209715792/composite
US : U.S.: NYSE
$ 1.52
-0.01 -0.65%
Volume: 347,579
Jan. 27, 2020 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$192.08 million
Rev. per Employee
$344,405
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/zigman2/quotes/209591999/composite
US : U.S.: Nasdaq
$ 12.03
+0.02 +0.17%
Volume: 750,440
Jan. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$709.58 million
Rev. per Employee
$242,315
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/zigman2/quotes/205199409/composite
US : U.S.: Nasdaq
$ 2.55
-0.14 -5.20%
Volume: 4.47M
Jan. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$279.91 million
Rev. per Employee
$465,247
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/zigman2/quotes/203476774/composite
US : U.S.: NYSE American
$ 2.31
-0.16 -6.48%
Volume: 1.26M
Jan. 27, 2020 4:10p
P/E Ratio
5.99
Dividend Yield
N/A
Market Cap
$167.49 million
Rev. per Employee
$2.86M
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/zigman2/quotes/202777853/composite
US : U.S.: Nasdaq
$ 20.34
-0.72 -3.42%
Volume: 2.43M
Jan. 27, 2020 4:00p
P/E Ratio
9.34
Dividend Yield
N/A
Market Cap
$2.11 billion
Rev. per Employee
$2.34M
loading...
/zigman2/quotes/201220766/composite
US : U.S.: Nasdaq
$ 53.87
+0.86 +1.62%
Volume: 171,289
Jan. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.18 billion
Rev. per Employee
$214,569
loading...
/zigman2/quotes/201917664/composite
US : U.S.: NYSE
$ 3.09
-0.14 -4.33%
Volume: 17.52M
Jan. 27, 2020 4:10p
P/E Ratio
3.02
Dividend Yield
N/A
Market Cap
$1.26 billion
Rev. per Employee
$2.70M
loading...
/zigman2/quotes/205347853/composite
US : U.S.: Nasdaq
$ 43.36
-0.62 -1.41%
Volume: 221,587
Jan. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.62 billion
Rev. per Employee
$1.14M
loading...
/zigman2/quotes/202535084/composite
US : U.S.: Nasdaq
$ 64.50
-1.74 -2.63%
Volume: 287,444
Jan. 27, 2020 4:00p
P/E Ratio
47.28
Dividend Yield
N/A
Market Cap
$2.37 billion
Rev. per Employee
$235,461
loading...
/zigman2/quotes/207492840/composite
US : U.S.: Nasdaq
$ 25.67
-0.32 -1.23%
Volume: 693,236
Jan. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.01 billion
Rev. per Employee
$3.13M
loading...
/zigman2/quotes/208773703/composite
US : U.S.: NYSE
$ 8.95
-0.62 -6.48%
Volume: 592,296
Jan. 27, 2020 4:10p
P/E Ratio
2.45
Dividend Yield
N/A
Market Cap
$247.88 million
Rev. per Employee
$863,038
loading...
/zigman2/quotes/206867288/composite
US : U.S.: NYSE
$ 8.61
-0.22 -2.49%
Volume: 721,940
Jan. 27, 2020 4:10p
P/E Ratio
18.10
Dividend Yield
6.74%
Market Cap
$1.34 billion
Rev. per Employee
$532,024
loading...
/zigman2/quotes/203319837/composite
US : U.S.: NYSE
$ 23.80
+0.09 +0.38%
Volume: 200,690
Jan. 27, 2020 4:10p
P/E Ratio
8.58
Dividend Yield
N/A
Market Cap
$800.69 million
Rev. per Employee
$914,675
loading...
/zigman2/quotes/201350452/composite
US : U.S.: Nasdaq
$ 62.62
-0.81 -1.28%
Volume: 533,018
Jan. 27, 2020 4:00p
P/E Ratio
16.13
Dividend Yield
3.58%
Market Cap
$955.56 million
Rev. per Employee
$103,641
loading...
/zigman2/quotes/200231910/composite
US : U.S.: Nasdaq
$ 23.17
-1.12 -4.61%
Volume: 648,154
Jan. 27, 2020 4:00p
P/E Ratio
16.26
Dividend Yield
N/A
Market Cap
$1.17 billion
Rev. per Employee
$1.21M
loading...
/zigman2/quotes/201429622/composite
US : U.S.: Nasdaq
$ 17.99
-0.78 -4.16%
Volume: 214,010
Jan. 27, 2020 4:00p
P/E Ratio
93.84
Dividend Yield
N/A
Market Cap
$754.57 million
Rev. per Employee
$290,000
loading...
/zigman2/quotes/209006405/composite
US : U.S.: NYSE
$ 29.99
+0.01 +0.03%
Volume: 141,629
Jan. 27, 2020 4:10p
P/E Ratio
1,935
Dividend Yield
N/A
Market Cap
$1.12 billion
Rev. per Employee
$238,946
loading...
/zigman2/quotes/204775795/composite
US : U.S.: Nasdaq
$ 12.18
-0.13 -1.06%
Volume: 553,207
Jan. 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$442.61 million
Rev. per Employee
$3.20M
loading...
/zigman2/quotes/208967974/composite
US : U.S.: NYSE
$ 5.23
+0.13 +2.55%
Volume: 637,954
Jan. 27, 2020 4:10p
P/E Ratio
32.91
Dividend Yield
N/A
Market Cap
$457.54 million
Rev. per Employee
$378,619
loading...
/zigman2/quotes/209042948/composite
US : U.S.: NYSE
$ 24.18
-1.87 -7.18%
Volume: 374,378
Jan. 27, 2020 4:10p
P/E Ratio
3.60
Dividend Yield
N/A
Market Cap
$1.41 billion
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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