The top 100 small caps in America for 2022

By Hank Tucker

After months of confinement by the coronavirus pandemic, The Joint Chiropractic Clinic, next to Lululemon and Sephora stores on Hoboken Central Avenue in New Jersey – one of a total of 666 points in the US chain – is a “relief” pole. for people who are “crooked” after 20 months of work from the couch of their home, crouched in front of a laptop screen. In its window “appears” an advertising offer in view of “Black Friday” – “in 10 visits to chiropractic treatment, a gift of two more” – as well as a special offer for new customers, with an introductory price of $ 29.

The chiropractic clinic franchise chain, based in Scottsdale, Arizona and headquartered in shopping malls, was one of the well-hidden “diamonds” during the pandemic, with Joint Corp. shares up 500% since the beginning of 2020. growth rate that places it at the top of the Forbes list of “America’s Top Small Capital Companies”, from 13th place last year.

Although most physical store businesses experienced declining sales or were forced to close at times last year, The Joint’s “tired” clientele did not change significantly.

“You may quit drinking for health reasons or because of the recession, but the pain is a real incentive,” says Peter Holt, the company’s chief executive.

The Joint does not operate by appointment, nor does it accept insurance funds, and charges a one-time fee of $ 39 for a single visit or a $ 69 subscription fee that covers four visits per month. In 2020, the chain handled 8.3 million patient visits, with total sales of $ 260 million. Its total revenue, including franchise fees, is expected to reach less than $ 100 million in 2021, so it is no surprise that its high capitalization of $ 1.3 billion has attracted short sellers (investors who bet in the fall of the share). However, the share of The Joint remains strong and Holt hopes that the chain will have 1,000 points by the end of 2023.

The “hidden” chickens

The Joint, however, is not the only case of a capitalized company that is often overlooked by most institutional investors, offering high-return opportunities to investors. On every “front page” written daily on the occasion of the opportunities provided by the securities of large capitalization, there are hundreds of cases of companies that do not catch the radar of institutional investors.

To make the list of the top 100 small-cap companies, Forbes analyzed more than 1,000 companies with a market capitalization of $ 300 million to $ 2 billion, based on their own stock returns, their own returns. capital, but also the growth rate of sales and their profitability during the last five years, however giving more weight to the data of the last 12 months.

Most of the top picks are little known, but come from all major industries, from technology and health to retail and construction.

Despite their last decade of underperformance, historical evidence suggests that small-cap stocks will “prevail” in the long run – as long as investors are willing to deal with volatility.

Research conducted by Yale professor Roger Ibbotson and financial consulting firm Duff & Phelps shows that from 1926 to 2020, small-cap capitalization was 11.9% per annum, while large-cap capitalization was 10.3%. In all, for almost a century, a $ 1,000 investment in small-cap stocks at the end of 1925 would have yielded nearly $ 42 million by the end of 2020, compared to just $ 11 million if the investment had been made in large-cap stocks.

“This is the beauty of the financial system we have, which allows individual entrepreneurs and small companies to thrive and shake up markets where competition may be more satisfactory,” said Darren Chervitz, a stock and equity firm. even lower capitalization Jacob Discovery Fund.

One of the companies that has shaken the waters and has played a catalytic role in the global recovery from the coronavirus pandemic is Retractable Technologies Inc., a suburb of Little Elm, Dallas, Texas, which produces syringes and needles. The company is in the top five of the list for the second year. The company’s founder and CEO, Thomas Shaw, a mechanical engineer, began designing safer syringes in 1989, following news that a doctor had been infected with HIV following an accidental needle puncture.

Retractable, founded in 1994, ensures that the needle is pulled back into the syringe after injection. In 2019, it made a profit and realized revenues of 41.8 million dollars. Then, due to the pandemic, its activity was launched.

By May 2020, the company had entered into nearly $ 240 million worth of contracts with the US government to increase production capacity, cover transportation costs, and deliver hundreds of millions of syringes for the coronavirus vaccination campaign. Of the $ 92.6 million in sales the company posted in the first half of 2021, $ 65.1 million came from its contracts with the government.

It is noted that Retractable has attracted the attention of the US government for both the safety and effectiveness of its products, as its syringes are designed to deliver six doses of vaccine from the standard five-dose vial. In 2020, the company’s share gained more than 600% from $ 1.50 to $ 10.75, and despite retreating this year amid strengthening competitors, the stock continues to record gains of more than 450% from the onset of the pandemic and beyond.

Shaw, who has not sold a single stake in Retractable, owns 43% of the company’s $ 130 million equity and still believes the stock is undervalued compared to the big names in the industry, such as Becton Dickinson and Medtronic.

Other highlights on this year’s list of “America’s Top Small-Cap Companies” are Monarch Casino & Resort, owner of the lesser-known casinos in Reno, Nevada, and Black Hawk, Colorado, the company America’s Car-Mart used car and living room furniture retailer La-Z-Boy.

One of the new entrants to this year’s Forbes list is Big 5 Sporting Goods. Few stocks have recovered at a stronger pace than the Big 5, which makes its debut on the list by occupying 14th place. Its over-the-counter shares sank to 71 cents each in April 2020 when it was forced to close most of its 430 branch stores in the western United States. Since then, it has jumped more than 6,000% to $ 44 per share, an appreciation even if it takes into account its $ 888 million revenue recovery in the first three quarters of 2021 and doubling its profitability compared to a year ago.

The Big 5 follows in the footsteps of another sports retailer, Hibbett, whose share has gained 150% in the last year and ranks 8th among the leading small-cap companies.

Tucker Walsh, manager of Polen Capital’s small-cap development fund, attributes the small-cap stocks’ overperformance to what he calls the “law of small numbers.”

“They can achieve and maintain a faster growth rate as they are not large enough to be difficult to replicate,” explains Walsh.

The 100 “America’s Top Small Capital Companies”