Deep Dive: Top stock picks for 2020: Standout small companies

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(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. Part 1 covers large-cap stocks, and part 2 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 SPX, +0.30%, the S&P 400 Mid Cap Index MID, +0.18%  and the S&P Small Cap 600 Index SML, +0.01%  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 IJR, +0.12%.

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. TTI, +0.00% 78% 22% 0% $1.26 $3.19 153% -25%
Cytokinetics Inc. CYTK, +1.37% 83% 17% 0% $9.63 $22.00 128% 52%
Spectrum Pharmaceuticals Inc. SPPI, +1.84% 100% 0% 0% $10.29 $23.20 125% 18%
Ring Energy Inc. REI, +0.68% 75% 25% 0% $2.05 $4.16 103% -60%
PDC Energy Inc. PDCE, +0.60% 82% 18% 0% $23.28 $43.44 87% -22%
Tabula Rasa Healthcare Inc. TRHC, -0.49% 78% 22% 0% $40.38 $74.14 84% -37%
Callon Petroleum Co. CPE, +0.70% 87% 13% 0% $4.26 $7.70 81% -34%
Regenxbio Inc. RGNX, +1.08% 83% 17% 0% $42.71 $75.67 77% 2%
Chart Industries Inc. GTLS, +1.75% 92% 8% 0% $55.99 $91.75 64% -14%
Renewable Energy Group Inc. REGI, -0.98% 100% 0% 0% $18.18 $28.80 58% -29%
Consol Energy Inc. CEIX, +1.53% 80% 20% 0% $13.34 $21.00 57% -58%
Archrock Inc. AROC, -0.05% 83% 17% 0% $8.93 $13.92 56% 26%
Enova International Inc. ENVA, +0.06% 100% 0% 0% $23.30 $36.20 55% 20%
Children’s Place Inc. PLCE, -22.02% 75% 25% 0% $69.90 $107.63 54% -21%
Tivity Health Inc. TVTY, +0.84% 100% 0% 0% $20.23 $31.14 54% -18%
OneSpan Inc. OSPN, -1.47% 80% 20% 0% $17.14 $24.40 42% 32%
CryoLife Inc. CRY, +2.50% 100% 0% 0% $24.21 $34.33 42% -15%
Green Plains Inc. GPRE, +1.22% 80% 20% 0% $14.22 $20.00 41% 10%
Newpark Resources Inc. NR, +1.07% 83% 17% 0% $5.80 $7.80 34% -16%
Talos Energy Inc. TALO, +8.78% 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

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