Hi there, Fools. I’m back again to highlight three attractive small-cap stocks. As a reminder, I do this because companies with a market cap under $2 billion have much more room to grow than larger more established blue chip companies, and are largely ignored by professional analysts.
If you want to turn an average $27K TFSA into a million dollar retirement hoard in 20 years, you’ll need an annual return of at least 20% to do it. So while small-cap stocks tend to be on the volatile side, the upside return potential is often well worth the risk.
If you’re looking to get your 2020 off to a hot start, this is a good place to begin looking.
Kicking off our list is Dream Office REIT (TSX:D.UN), which currently sports a market cap of roughly $1.7 billion. Shares of the office property company are up about 23% over the past year.
Dream Office’s heavy exposure to the Greater Toronto Area (89% of portfolio), impressive scale (over four million square feet of gross leasable area), and strong balance sheet should continue to drive solid long-term returns. In the most recent quarter, funds from operations (FFO) clocked in at $26.7 million.
“We are well positioned to capitalize on opportunities that can continue to grow the value and quality of our business,” said CFO Jay Jiang.
Dream Office shares trade at a P/E of 15 and offer a dividend yield of 3.3%.
Disappointing growth and industry turbulence have weighed heavily on the shares, but Aphria seems to be heading into 2020 with some positive momentum.
In October, the stock surged on better-than-expected Q1 sales and cost controls. More recently, the company doubled capacity after its Aphria Diamond facility received a cultivation license from Health Canada.
“Reaching industry-leading production levels coinciding with the expansion into new categories and new opportunities for cannabis in Canada and around the world is a transformative moment for Aphria Inc,” said Chairman and CEO Irwin Simon.
Aphria shares sport a high beta of 3.7.
Easy does it
Rounding out our list is goeasy (TSX:GSY), which sports a market cap of $960 million. Over the past year, shares of the alternative lender are up an impressive 74%.
Goeasy’s leading position in the Canadian subprime space, impressive scale (it has originated over $3.6 billion in loans throughout its history), and growth trends should continue to support solid long-term gains.
In the most recent quarter, the company’s loan portfolio jumped 38%, net income improved 38%, and revenue increased 20%.
“Our progress to improve the future credit quality of our portfolio … and strengthen our balance sheet with $120 million of increased capacity and reduce borrowing costs, provides further confidence to achieve our targets for 2019 and beyond,” said CEO Jason Mullins.
Goeasy currently trades at a forward P/E in the low teens.
The bottom line
There you have it, Fools: three attractive small-cap stocks worth checking out.
As always, they aren’t formal recommendations. Instead, view them as a starting point for more research. Small caps carry more risk than the average stock on the TSX Index, so extra caution is required.
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Fool contributor Brian Pacampara owns no position in any of the companies mentioned.