For the experienced stock market investor, risk tolerance is an important term. It is a quality every investor possesses, but it varies drastically from one person to another. Some investors love playing it safe in the stock market. Instead of taking risks, they prefer investing in large-cap, blue-chip stocks. While the returns are gradual and slow, these stocks offer lower risk to investor capital.
Then there are investors who love investing in volatile stocks. The riskier the stocks are, the more growth potential they can offer. However, the most practical approach to stock market investing would be finding a good middle ground.
You are not limited to the blue-chip stock pool if you want more growth potential. At the same time, it does not mean you have to poke around the riskiest publicly traded companies to grow your wealth.
The TSX also has plenty of small-cap stocks that perform well. Today, we will look closely at two small-cap growth stocks you can consider for your self-directed investment portfolio.
TerraVest Industries (TSX:TVK) is a $664.55 million market capitalization diversified industrial company headquartered in Vegreville. While relatively unknown compared to many large-cap stocks, it is not a business to shrug aside easily. The company manufactures and sells various goods and services to different end markets, from mining to agriculture, transportation, and several others.
The company effectively buys businesses producing these goods and services at cheap valuations. Then it lends its operational expertise to turn those smaller businesses into cash cows. The returns it gets from these businesses flow into funding more acquisitions and growth. As of this writing, TerraVest stock trades for $37.10 per share, up by over 260% in the last five years.
Clairvest Group (TSX:CVG) is a $1.12 billion market capitalization stock that can barely be called a small-cap stock. However, the Toronto-based private equity firm still falls under the category. The company invests in and partners with the management teams of businesses with the potential to create average returns in their respective industries.
The company offers its money and strategic expertise to support, grow, and develop these companies, creating value for all stakeholders.
The company has a knack for identifying winning businesses to target and furthering its goals through partnerships and acquisitions. In turn, its business model has allowed Clairvest Group stock to create value for its investors, making them wealthier through capital gains. As of this writing, Clairvest stock trades for $75.12 per share, paying its investors a 0.13% dividend yield.
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These two small-cap stocks represent companies with solid positions in their respective niches and have performed well during adverse market environments. While TerraVest Industries and Clairvest Group might not have the big names many of the blue-chip stocks do, they are resilient and reliable picks that can grow in your portfolio for decades.
If you have some money set aside for long-term wealth growth that you can invest and forget, consider allocating some of it to these two small-cap growth stocks.