How do you make sense of the current market conditions? We came off a strong bull year for stocks with the worst January in a long time – but the month ended, and February started with the best two-day action since April 2000. And in a quirk, that investors should note, small-cap stocks are showing strong signs of being heavily oversold.
Small-caps took a harder hit in January’s swoon than the market giants, and according to JPMorgan’s Chief Global Markets Strategist Marko Kolanovic, investors should buy the dip.
“Small cap valuations are at 20Y lows, and investor sentiment is bearish. Many market metrics such as recent performance of high vs. low beta stocks and valuations of small caps are already fully pricing in a recession – something we do not see materializing,” Kolanovic noted.
Against this backdrop, we used TipRanks’ database to locate several oversold small-caps that have received enough bullish support from analysts to earn a “Strong Buy” consensus rating. The upside potential at play here isn’t too shabby, either.
ACV Auctions (ACVA)
We’ll start with ACV Auctions. This company takes wholesale auto dealer auction sales online, streamlining the process and bringing a winning combination of transparency, speed, and candor to the auto wholesale market. ACV is a holding company, whose subsidiaries handle the full range of services involved in automotive wholesaling – from managing the auctions, to providing financing for buyers, to transporting vehicles, to providing unbiased third-party car inspections.
The company has been public for just under one year, having held its IPO on March 24 of last year. The initial offering saw ACV put more than 19 million shares on the market, at a price of $25 each, and the company raised $414 million in new capital. Since the IPO, however, ACV stock price has fallen by 63%.
Despite the fall in share price, ACV has been reporting solid year-over-year revenue gains. In the last quarter reported, 3Q21, the company showed $91.8 million at the top line, up 36% yoy. This included a 41% gain in Marketplace and…