2020 has been an opportunistic year for investors. The coronavirus pandemic has had a huge impact on almost every business imaginable. While many major TSX stocks have seen strong and rapid recoveries, small-cap value stocks have gotten a lot less attention.
During the first half of the recovery, much of the market focused on growth stocks. This made sense, as a tonne of tech stocks have seen record growth due to the pandemic.
However, once these stocks had seen a massive run-up in price, investors had to turn elsewhere to find return potential. This has caused some large-cap value stocks to be some of the top performers as of late.
Small-cap value stocks, however, with less coverage still offer investors major discounts. And if you can find a high-enough quality stock that offers solid long-term growth potential, buying at these levels could be the opportunity of a lifetime.
The news of a vaccine has brought a lot of optimism to markets, so it’s even more crucial that if you want to take advantage of one of these insane discounts, you’d better act soon.
Here are three of the top tiny TSX value stocks I would strongly consider buying today.
Laundry and linen: A lagging industry
A lot of attention has been on the travel and hospitality industry since the start of the pandemic. These two industries are, by far, some of the worst impacted industries of the pandemic. One stock, though, that’s gotten a lot less attention is a company that services those industries is K-Bro Linen (TSX:KBL).
K-Bro, in addition to providing laundry and linen services to the airline and hotel industry, also serves the healthcare sector. So, although it has seen a massive impact from the pandemic, its defensive side of the business is extremely resilient. In fact, in 2019, healthcare accounted for 55% of its revenue. This has been key to K-Bro’s survival and keeps the top stock positioned well for the end of the pandemic.
The company is easily the largest in its industry in Canada. This size and industry dominance will be key for growth opportunities, especially if smaller competitors aren’t resilient enough to survive the economic impact.
So, after a decade of consistent growth, investors can now get the stock for as cheap as it was back in 2014. That’s an absolute steal when you consider its massive long-term potential.
Winemaking value stock
Another high-quality value stock that investors can own for years is Andrew Peller (TSX:ADW.A). Andrew Peller Limited is an alcoholic beverage maker that predominantly produces and distributes wine.
Over its 60-year history, the stock has grown substantially through several high-quality acquisitions as well as organically.
One of the things that Andrew Peller does best is diversify its operations as well as its branding. This is key and helps the business run efficiently, especially since it’s vertically integrated.
That integration is what’s helped the company to weather the coronavirus pandemic better than most investors expected. Despite much of its revenue from restaurants being lost, the company has actually seen a slight increase in sales, as its retail stores help make up a bunch of the lost demand.
The impact on business Andrew Peller has seen has almost been completely offset by its own business makeup. Yet the value stock still trades roughly 15% off its 52-week high. That’s a deal that’s too good to pass up.
Tiny TSX tech stock
The last stock is one that easily has the most growth potential of the three, Score Media and Gaming (TSX:SCR). Score’s potential comes from its recent entry into the sports gambling business.
Over the years, the company has built up a massive user base for its sports tracking app. Now, the tech stock looks to capture that massive user base and offer betting services, an industry with massive potential upside.
The initial growth has been delayed by the pandemic, as most sports are on hold. However, that’s offering investors incredible value to buy the stock today.
Currently, Score trades nearly 30% off its high. Plus, it has a market cap of just $280 million, showing the tiny stock has huge room to grow.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Daniel Da Costa has no position in any of the stocks mentioned.