Wall St futures flat amid US-China trade jitters; bank earnings in focus
-
Tech stocks and small caps have been on a winning streak.
-
Fed rate cuts and market momentum could fuel the next leg up.
- Which are the best US technology small-caps that could lead the rally?
- Get all the tools you need to easily build an outperforming portfolio by subscribing to InvestingPro at up to 50% discount during the Flash Sale.
Technology stocks have been performing very well in recent months. The Nasdaq 100 and NASDAQ Composite, which are heavily made up of tech companies, rose 8.29% and 9.95% over the past three months. In comparison, the S&P 500 went up 6.16% and the Dow Jones gained 3.62%.
Small-cap stocks have also done better than the broader market. The Russell 2000, which tracks US small companies, rose 9.41% over the same period.
With the Federal Reserve expected to continue cutting interest rates, and investors anticipating rate cuts at every upcoming FOMC meeting this year, the outlook looks positive for both tech and small-cap stocks. These types of stocks tend to benefit when rates are falling.
We decided to focus on opportunities in US small-cap technology stocks. Using Investing.com’s screener, we filtered for US tech companies with market values between $300 million and $2 billion, which gave us a list of 234 stocks.
Our next step was to find the most undervalued stocks on this list, while also considering their financial health.
We applied the following search filters:
- Stocks with a bullish potential of more than 30% based on the InvestingPro Fair Value.
- Financial Health Score above 3 out of 5 on InvestingPro.
NOTE: InvestingPro Fair Value calculates an intelligent average of several recognized valuation models for each stock on the market. The Health Score, on the other hand, is based on several key financial metrics and peer comparisons to assess the strength of a company’s finances. If you are not an InvestingPro subscriber already, click here to subscribe now!
This first round of screening helped us pinpoint 10 promising stocks:
Although the Screener’s basic functions are available free of charge, in this search, we used metrics reserved for InvestingPro subscribers, Pro+ plan. If you have a Pro+ subscription, click here to be directed to this search recorded directly on the Screener.
According to InvestingPro Fair Value, these stocks are undervalued by 31.9% to 60.9%.
Next, we looked for US technology small caps favored by analysts. We used these criteria:
- Stocks covered by at least 10 analysts.
- Potential upside of more than 30% based on the analysts’ average target.
This search highlighted seven additional potential opportunities:
This search uses criteria available for free to all registered Investing.com users. Click here to access the screener directly.
These small-cap US technology stocks could rise between 33.2% and 112.5% based on analysts’ average target prices.
Conclusion
Right now, US technology small caps offer many promising opportunities. With strong Q4 seasonality and expected Fed rate cuts, this could be a good time to consider investing in these stocks ahead of a potentially strong year-end.
Join us on InvestingPro and discover just how easy investing can be when you have the right tools at your fingertips. Save up to 50% on an investingPro membership amid the Flash Sale!