Many analysts forecast that an interest rate cut is coming by September. When that happens, speculative capital is likely to move away from large-cap stocks. That’s why it’s a good time to consider small-cap stocks to buy.
As interest rates went higher in 2022 and 2023, small-cap stocks fell out of favor. Many of these stocks are those of small, early stage companies that are not yet profitable. The rising cost of capital due to higher interest rates can most affect these companies.
That’s the risk that can come from investing in small-cap stocks. However, these are also the stocks that make a 10x gain more probable. That magnitude of gain is more likely after a time when these stocks have been under pressure. That’s why a little investment in these three small-cap stocks to buy could be a smart play before the Federal Reserve cuts interest rates.
Clean Energy Fuels (CLNE)
Clean Energy Fuels (NASDAQ:CLNE) specializes in providing natural gas in alternative forms such as renewable natural gas, compressed natural gas and liquified natural gas for a variety of applications.
At the onset of Russia’s invasion of Ukraine, natural gas prices spiked sharply. Many analysts saw this as the beginning of a long-term uptrend for natural gas. But instead of moving higher, natural gas prices have come down and are trading at levels not seen for over 20 years.
Not surprisingly, you can see the same price action play out in the chart for CLNE stock.
However, natural gas demand is expected to spike due to the power needs of data centers, which are used to power artificial intelligence applications. That will be bullish for companies such as Clean Energy Fuels, which is responsible for refining and marketing natural gas.
Nine analysts have a consensus price target of $7.06 for CLNE stock. That would be a gain of over 155% in the next 12 months. Considering that we’re only at the beginning of a multi-year cycle of increased natural gas demand, CLNE stock is likely to be one of the small-cap stocks to buy for years to come.
Bitdeer Technologies (BTDR)
The recent Bitcoin halving event brought Bitcoin (BTC-USD) miners to the forefront for many investors. Bitdeer Technologies (NASDAQ:BTDR) is one of those Bitcoin mining stocks that warrants a second look.
Bitdeer not only mines Bitcoin, but has also developed its own Bitcoin mining chip, the 4 nm SEALMINER chip offering 18.1 J/TH efficiency. Bitdeer markets it as a chip designed by miners, for miners. It will also help the company avoid supply chain disruptions and optimizing its operational efficiency. Bitdeer also offers cloud computing, AI cloud, and data center solutions for businesses.
That said, BTDR stock has not been following Bitcoin higher in 2024. In fact, the stock is down 45% this year. Nevertheless, eight analysts have a consensus price target of $13.31 for Bitdeer, which would be a 147% return in the next 12 months.
Affimed (AFMD)
Any decent list of small-cap stocks to buy for $10 or less per share with high upside potential will include biotech stocks. Many of these companies, such as Affimed (NASDAQ:AFMD), are developing innovative treatments for existing diseases and chronic conditions.
Affimed is attacking cancer treatment via its Innate Cell Engager (ICE) molecules, which in layman’s terms, help the body’s natural (or innate) immune system fight solid and liquid tumors. The company’s lead candidate, AFM13-202 for peripheral T cell lymphoma, completed Phase 2 trials. That means it will take some time to get it approved.
Biotech investors often worry that their company will run out of cash before it gets a product approved. However, Affimed reports that it is funded through the first half of 2025. That will allow the company to “drive clinical development to meaningful inflection points.”
The consensus price target of seven analysts is $15.08. That would be a whopping 190% gain from the stock’s price at this writing. Six out of those seven analysts give AFMD stock a “strong buy” rating.
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On the date of publication, Chris Markoch did not have (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.