Small-cap stocks with solid financials are expected to thrive in the coming months as the economic recovery gains pace. So, based on that premise, we think it is wise to bet on Group 1 Automotive (NYSE:GPI), SPX FLOW (FLOW), and Kulicke and Soffa (KLIC). These names possess immense growth potential. Read on.It was widely predicted that 2021 would be a year of recovery. Meeting that expectation, the U.S. economy appears to be on the path of recovery with easing of COVID-19 related restrictions thanks to a widespread and, so far, successful vaccination drive. Industrial and manufacturing activities are on the rise, which is driving a job market recovery. Small-cap stocks have been making a solid comeback in this scenario thanks in part to the government support to small- and medium-sized businesses (SMBs).
Small-cap companies usually perform well during an economic recovery due to their easy access to funds, which helps them invest in business growth. Given the current low interest rate environment, the growth for small-cap companies should continue in the near term. Investors’ increasing interest in the small-cap stocks is evident in the SPDR S&P 600 Small Cap ETF’s (SLY) 31.9% returns over the past six months compared to the large-cap focused SPDR S&P 500 ETF Trust’s (SPY) 15.6% gains.
So, for investors who can tolerate some risk and want to invest in stocks with immense growth potential, Group 1 Automotive, Inc. (GPI), SPX FLOW, Inc. (FLOW), and Kulicke and Soffa Industries, Inc. (KLIC) could be the ticket. These three top-rated stocks possess solid upside potential.