Market volatility is back, and in a big way. The double whammy of a potential trade war and the ongoing Facebook scandal are making investors jittery. The S&P 500 and Nasdaq both posted steep losses of more than 2% each, while the Dow Jones dropped more than 400 points into correction territory. That made it the worst week for the Dow since January 2016.
So what should investors do now? According to the Street, while these losses may be unsettling, investors shouldn’t panic. The market is still in normal correction territory. However, some stocks may be better suited to volatility than others. And one of these groups is small cap stocks.
“We maintain our tactically bullish stance on small-caps over large-caps given the accelerating economic and corporate profit outlook,” writes Bank of America equity strategist Dan Suzuki. “The near-term risks appear firmly to the upside.”
In fact, Suzuki notes that small-caps have outperformed their larger peers since early February.
These stocks are a better bet right now says Suzuki because: 1) thinly-traded small-caps are less vulnerable to sharp price movements; 2) the new tax law has a disproportionately positive impact on small-caps; and 3) small cap companies tend to be domestically focused and are therefore less exposed to trade war damages.
“Small-caps have a much smaller revenue coming from overseas, so they are much less affected by tariffs than the multinationals,” Sean O’Hara, president of Pacer ETFs, explained to CNBC recently.
How to find ‘Strong Buy’ small cap stocks
Bearing this in mind, we turned to TipRanks’ powerful stock screener to pinpoint some interesting small-cap ideas that are worth tracking right now. In just a couple of clicks you can pull up small cap stocks with a ‘Strong Buy’ analyst consensus rating from the Street’s best-performing analysts. These are the analysts who consistently outperform the market- and their peers. You can also set other filters including news sentiment, blogger sentiment or hedge fund sentiment to find the best stocks for your strategy.