Many investors naturally default to blue-chip stocks when looking for stable and safe investments. But even though it’s the easiest route to take, this approach may prevent these investors from leveraging other, more potent pools of potential investments.
This includes but is not limited to, small-cap stocks, many of which represent companies considered leaders in their small, niche market segments. You may want to keep an eye on two such small-cap industry leaders.
A diagnostic laser systems company
US-based Hamilton Thorne (TSXV:HTL) is one of the leading providers of advanced laser and imaging devices used in fertility clinics. It controls the end-to-end development of these devices, i.e., from design to manufacturing, and handles distribution as well. Five different brands are under the Hamilton Thorne names, each with its own market presence.
Hamilton Thorne is among the leaders in this niche industry. The company’s laser technology powering precision instruments gives it a strong competitive edge. It has a decent range of products, and the business model allows it to generate revenue from both new and recurring sources (consumables for the equipment already sold).
The stock has come a long way since 2016 when it traded for around $0.2 per share. HTL has risen by about 740% since then, and even though it’s still a micro-cap stock, it’s steadily getting closer to the bottom tier of the small-cap segment.
An EV company
Lion Electric (TSX: LEV) is too humble an EV company to be considered among the leaders in the industry, even in North America. But it’s among the sizable players in a specific niche within the EV industry, school buses, which fall under the mass transportation category. Three of its five products are school buses, and the others are passenger buses and EV trucks.
Another thing that makes Lion Electric stand out, apart from its focus on school buses – which may prove to be a powerful growth avenue within the EV segment – is the range of services it offers complimenting its EV products. The company offers infrastructure services, telematic services, and even financing solutions, making it an ideal pick for entities/organizations looking for end-to-end EV solutions.
Once schools in North America start transforming their fleets to EVs, Lion Electric might be in a very strong position. As a stock, Lion Electric has been the complete opposite of Hamilton Throne. The stock has mostly gone downhill since its inception and is currently at an almost 88% discount from its peak. This steep slump may become a powerful growth ally when the stock finally turns things around.
Foolish takeaway
The two small-cap stocks can be powerful additions to your portfolio. One of the stocks has already shown its growth potential, while the other may be perfectly positioned to take advantage of an EV boom in mass transportation. Even though they may not have the history and presence of blue-chip stocks, the returns they offer more than make up for this modest limitation.
