Do you own any of th­ese small stocks up 100%?

They’re ‘com­ing of age,’ but be aware of risks

USA TODAY US Edition - - MONEY - Adam Shell

If you’re a stock in­vestor, you’ve heard of blue chips such as Ap­ple, Face­book and Visa. But what about Okta? Or Sun­run? Does Twilio ring a bell?

Chances are you’re draw­ing a blank. The rea­son: Th­ese are small stocks that are “com­ing of age, undis­cov­ered, un­der the radar and less fol­lowed by Wall Street,” says Amy Zhang, man­ager of the Al­ger Small Cap Fo­cus Fund.

Their rel­a­tive ob­scu­rity, how­ever, hasn’t kept them from be­com­ing some of Wall Street’s high­est-fly­ing stocks this year. All have dou­bled in value and are among a list of com­pa­nies in the small-com­pany Russell 2000 stock in­dex that have gained more than 100%, ac­cord­ing to Bloomberg.

Nearly half­way through 2018, the over­all in­dex is up 9.6 per­cent, much more than the 4.2 per­cent gain of the large-com­pany Stan­dard & Poor’s 500 stock in­dex.

It’s “small caps’ turn,” Ed­ward Campbell, a se­nior port­fo­lio man­ager at fi­nan­cial firm QMA in Ne­wark, N.J., wrote in a re­port, re­fer­ring to the lower cap­i­tal­iza­tion of th­ese com­pa­nies.

Small stocks are ben­e­fit­ing from shifts in pol­icy and the geopo­lit­i­cal mood. Their tax bills are now lower, which has boosted earn­ings. An­other pos­i­tive is that they gen­er­ate most of their sales in the U.S., which has a strong econ­omy and also in­su­lates them from cur­rent in­ter­na­tional trade con­flicts and tar­iffs.

Along with the cur­rent strengths, small-cap stocks also have the al­lure of raw potential. In­vestors who buy shares of small firms “are bet­ting on a much big­ger com­pany” in the years ahead, says JP Gravitt, CEO and chief mar­ket strate­gist at Mar­ket Re­al­ist, an in­de­pen­dent mar­ket re­search firm.

But be­fore div­ing head­first into the small-cap mar­ket, in­vestors must be aware of the risks, Gravitt warns. For ev­ery big win­ner in the Russell 2000, there are also big losers. Cur­rently, there are roughly three dozen stocks in the in­dex that are down more than 50 per­cent, ac­cord­ing to Bloomberg.

Small com­pa­nies’ for­tunes of­ten de­pend on a hand­ful of key cus­tomers, so los­ing a big client can dam­age the busi­ness. There’s al­ways a chance a new prod­uct won’t pan out, or a drug with prom­ise won’t pass muster with reg­u­la­tors, or some man­age­ment mis­step causes ir­repara­ble harm. In some

cases, th­ese com­pa­nies are spend­ing so much to ac­quire new cus­tomers and book more sales that they don’t even earn a profit.

Here are 10 stocks in the Russell

2000 that should be on your radar:

❚ 1. In­tel­sat (year to date re­turn

+375 per­cent): With a fleet of more than 50 satel­lites, In­tel­sat con­nects air trav­el­ers to mo­bile de­vices in flight. It en­ables news out­lets and other content providers to trans­mit video pro­gram­ming to view­ers around the globe and pro­vides broad­band sig­nals and con­nec­tiv­ity to wire­less sub­scribers.

❚ 2. Ge­n­e­sis Health­care (YTD re­turn +214 per­cent): The com­pany op­er­ates more than 450 nurs­ing home and as­sisted se­nior-liv­ing com­mu­ni­ties in 30 states. Its sub­sidiaries also sup­ply spe­cial­ized care to more than

1,600 health care providers.

❚ 3. Twilio (YTD re­turn +146 per­cent): If you’ve used Uber to hail a ride or mes­sag­ing ser­vice What­sApp to stay in touch, you’ve seen Twilio’s cloud-driven com­mu­ni­ca­tions plat­form in ac­tion. The tech­nol­ogy al­lows app users to make and re­ceive phone calls and texts in­side the apps.

❚ 4. Im­mer­sion (YTD re­turn +144 per­cent): Im­mer­sion is known for its in­no­va­tions in hap­tic tech­nol­ogy, which ex­tends the power of touch to the dig­i­tal world. For ex­am­ple, gamers are able to “feel the G-forces ap­plied to a car around an S curve,” ac­cord­ing to the com­pany’s web­site.

❚ 5. Axon ( YTD re­turn +142 per- cent): Axon, for­merly known as Taser In­ter­na­tional, has broad­ened its reach. Axon re­mains closely linked to law en­force­ment, as its body-worn and in-car cam­eras are in­creas­ingly used by po­lice of­fi­cers for video ev­i­dence pur­poses. It also aids law en­force­ment of­fi­cials with a cloud-based dig­i­tal sys­tem to man­age ev­i­dence.

❚ 6. Enova In­ter­na­tional (YTD re­turn +128 per­cent): This on­line fi­nan­cial ser­vices com­pany pro­vides access to credit to bor­row­ers with lim­ited access to funds through more tra­di­tional means. It of­fers short-term loans and lines of credit to small busi­nesses and con­sumers with poor credit.

❚ 7. Med­i­fast (YTD re­turn +126 per­cent): An in­ter­net-based, doc­tor-de­vel­oped weight-loss pro­gram that meshes feed­back from physi­cians, who serve as coaches, with nu­tri­tion­ally bal­anced meals and sup­ple­ments.

❚ 8. Sun­run YTD re­turn +122 per­cent): The firm de­signs and in­stalls res­i­den­tial rooftop so­lar sys­tems to homes. Sun­run fo­cuses on clean, green-friendly power.

❚ 9. Loxo On­col­ogy (YTD re­turn

+107 per­cent): The bio­phar­ma­ceu­ti­cal com­pany de­vel­ops highly se­lec­tive medicines for pa­tients with can­cer. Its drug pipe­line fo­cuses on can­cers that are uniquely de­pen­dent on sin­gle gene ab­nor­mal­i­ties so that a sin­gle drug has the potential to treat the can­cer.

❚ 10. Okta (YTD re­turn +106 per­cent): Okta is an iden­tity man­age­ment com­pany you might have come in con­tact with at work. Its cloud soft­ware helps com­pa­nies man­age their em­ploy­ees’ pass­words, by pro­vid­ing a “sin­gle sign-on” ex­pe­ri­ence that al­lows in­stant access to all apps.

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