The fear of missing out generally results in losses as investors enter a stock at peak euphoria. The same story would have been ignored at cheap valuations. I, therefore, stay away from ideas that seem too much in the limelight or overbought fundamentally and technically.
A wise strategy is to buy stocks depressed for an extended period and trading at a significant valuation gap. These stocks are overlooked or ignored by the markets. The focus of this column is to identify overlooked small-cap stocks that could potentially surge higher this year.
The small-cap stocks discussed represent fundamentally strong businesses with positive impending growth catalysts. In my view, these undervalued small-cap stocks can surge higher by 50% to 75% within the next 12 months.
Let’s discuss the factors likely to support upside in these stocks.
IAMGOLD (NYSE:IAG) stock has remained sideways for the last 12 months and is among the overlooked small-cap stocks to buy. The gold miner is positioned to benefit as gold trends higher on the likelihood of potential rate cuts this year. Further, geopolitical tensions support the case for gold as an attractive asset class.
Specific to IAMGOLD, there are two major positives. First, as of Q3 2023, IAMGOLD reported a liquidity buffer of $1 billion. That provides ample flexibility to make aggressive investments to benefit from higher gold prices.
Further, IAMGOLD expects the first production from the Côté gold mine in Q1 2024. Côté is one of the largest gold mines in Canada. As production increases in the coming quarters, IAMGOLD is expected to benefit from higher price realization coupled with production upside. I, therefore, expect healthy free cash flows in the coming quarters.
It’s worth adding here that in December 2023, the company acquired Vanstar Resources. The latter has gold assets located in Northern Quebec. With a strong balance sheet, opportunistic acquisitions will increase the growth potential.
HIVE Digital Technologies (HIVE)
HIVE Digital Technologies (NASDAQ:HIVE) stock has been relatively depressed because Bitcoin (BTC-USD) has rallied significantly from lows. However, I believe this Bitcoin miner is poised to rally in 2024 if sentiments remain positive for the cryptocurrency world.
Among Bitcoin miners, Hive differentiates itself as a miner with the lowest general and administrative costs. Since 2021, the company’s G&A cost per Bitcoin mined is 9% of the total cost compared to 29% and 30% for Bitfarms (NASDAQ:BITF) and Riot Platforms (NASDAQ:RIOT), respectively.
It’s also worth noting that in October 2022, Hive reported a hash rate capacity of 2.4EH/s. In the current year, Hive expects to increase capacity to 6EH/s. With a strong balance sheet, capacity will likely continue to swell.
I must add that the company is building HIVE Cloud. The service will be “offering affordable GPU compute and privacy to small and mid-sized businesses.” With growth and diversification, the outlook seems positive for HIVE stock.
Cronos (NASDAQ:CRON) stock has been in the limelight in the past. However, the stock has been ignored and looks deeply undervalued. With some positive business developments, I am positive on CRON stock trending higher from current levels of $2.
It’s worth noting that as of Q3 2023, Cronos reported cash and equivalents of $840 million. The company has a strong cash buffer to pursue organic and potential acquisition-driven growth. Assuming a federal-level legalization scenario in the United States, CRON stock will skyrocket.
Cronos is also making gradual inroads into the global medicinal cannabis market. In September 2023, the company commenced medical cannabis shipments to its German distribution partner, Cansativa GmbH.
Further, the company has started distribution in the Australian market with its first shipment of cannabis flowers to Vitura Health Limited. With a big medicinal cannabis market potential in Europe, Cronos is positioned for accelerated growth in the next few years.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.