“Safety” is a relative term when it comes to stocks. No stock can be termed perfectly safe, no matter how stable the company it represents. But several factors influence how safe a stock may be, including the industry the company belongs to, its position in the industry, finances, etc. While market capitalization is not a factor per se, most conservative investors prefer to stick to large-cap, blue-chip stocks.
These are mature stocks with a strong market presence and a reliable customer base. The market capitalization is typically larger than $10 billion (large-cap requirement). However, this excludes a significant portion of the stock market.
If you want to choose from the broadest pool of stocks to find a good fit for your portfolio, there are a few good choices available in the lower tier of the market capitalization (small cap). Two of them stand out from the rest.
Healthcare businesses may seem evergreen, but there is a lot of variation among the different types of healthcare stocks. Some of them may offer consistent performances, while others provide sporadic bursts of growth that investors can capitalize upon. WELL Health Technologies (TSX:WELL), which doesn’t fit neatly in either category and combines healthcare and tech, is still a compelling pick.
The stock is currently trading at a 45% discount from its 2021 peak. The market capitalization is at $1.13 billion, putting it squarely in the centre of the small-cap pool. The discount would have been more profound if the stock hadn’t made a decent recovery in 2023. It has risen by about 71% since the beginning of the year.
The company has developed an extensive network of clinics and over 22,000 healthcare providers in Canada and the United States. It’s a strong and established player in the telehealth industry, and once this particular segment of the healthcare sector gains more traction, Well Health may emerge as a powerful investment.
It has already displayed the potential for powerful growth in the right market conditions by growing almost 1,700% in the two years between Jan. 2019 and Jan. 2021.
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Jamieson Wellness (TSX:JWEL) is Canada’s major natural health products company. It covers the full lifecycle of these products — i.e., from manufacturing to distribution, and has multiple brands under its banner.
This includes Jamieson’s own brand, which has been operating in the country for nearly a century and develops a wide range of natural health products, including vitamin supplements, cough support, and plant-based proteins.
It also has a U.S.-based beauty and wellness brand, a well-known immune support brand, and a protein/supplement brand for athletes.
This small-cap stock has gone through multiple growth cycles in the last five years alone. It’s currently discounted, so buying now and waiting for the next long-term bull market to manifest can give you a decent chance at modest capital appreciation. The company also offers dividends, which augments its return potential.
The two small-cap stocks are leaders in their respective market segments, a characteristic of larger blue-chip stocks. Jamieson, even though it’s a relatively new stock, represents a company that can trace its roots back a hundred years, while Well Health is equipped to benefit from the next phase of the healthcare sector’s evolution.