Why I’d Consider These 3 Small Caps for a $5,000 Investment With Long-Term Horizons

Investing in small-cap stocks such as Vecima and Total Energy should help you deliver outsized gains over the next 12 months.

Investing in quality small-cap stocks and holding them over time is a proven strategy to generate inflation-beating returns. Several big tech stocks, including Apple, Amazon, and Nvidia, were once small-cap companies flying under the radar. However, these fundamentally strong stocks, part of rapidly expanding addressable markets, have delivered game-changing returns to shareholders over the past two decades.

In this article, I have identified three small-cap stocks Canadian investors should buy right now.

Asset Management

Source: Getty Images

Is this small-cap stock a good buy?

Alvopetro Energy (TSXV: ALV) reported a strong start to 2025, with January and February production averaging 2,375 barrels of oil equivalent per day, up 37% from the fourth quarter (Q4) of 2024. The company recently increased its dividend to US$0.10 per share, representing a yield of around 10%.

The Brazil-focused natural gas producer secured an upgraded gas sales agreement with Bahiagás, increasing sales by 33% with prices recalculated quarterly based on Brent and Henry Hub benchmarks. Current realized natural gas prices exceed $10.5 per thousand cubic feet (MCF), generating industry-leading operating netback margins of 86%. One MCF is equal to 1,000 cubic feet of natural gas.

Alvopetro maintains a strong balance sheet with $13.2 million in working capital and no debt. It recently expanded into Canada’s heavy oil sector, drilling two multilateral wells expected to begin production within 30 days.

With a disciplined capital allocation strategy that balances growth with shareholder returns, Alvopetro presents a compelling investment case while offering shareholders an attractive dividend yield.

Is the TSX tech stock a good buy?

Valued at a market cap of $215 million, Vecima Networks (TSX: VCM) reported disappointing results in fiscal Q2 of 2025 (ended in December). While sales rose by 15% year over year to $71.2 million, the top line was down 13% on a sequential basis.

Moreover, Vecima posted a net loss of $7.9 million or $0.32 per share and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.1 million, down from $12.5 million in the year-ago period due to $4.3 million in non-cash foreign exchange losses.

Its gross margins declined to 36.4% from 49.8% the previous year due to product mix changes and increased shipments of lower-margin platforms. Vecima also implemented a 12% workforce reduction expected to yield $17.5 million in annualized savings.

Despite financial challenges, Vecima maintains strong market positions with a 40% global share in Remote PHY and over 80% in Remote MACPHY. It continues advancing its virtual CMTS solution with lab trials at four North American MSOs (multi-system operators) and expects revenue contribution by year-end.

Management acknowledges near-term uncertainty due to customer project timing and potential U.S. tariffs. Still, it remains confident in long-term growth as cable operators continue to upgrade their networks to support multi-gigabit services. Vecima also maintained its quarterly dividend of $0.055 per share, which yields 2.5%.

Should you own this small-cap energy stock?

The final TSX small-cap stock on the list is Total Energy Services (TSX: TOT), which reported a record revenue in 2024. Total Energy increased sales by 15% year over year in 2024, but EBITDA declined by $4.7 million. The company generated significant free cash flow, which enabled a $25.5 million debt reduction and returned $35.2 million ($0.92 per share) to shareholders through dividends and share buybacks in 2024.

Total Energy maintains a strong financial position with $78.7 million in working capital, including $38.4 million in cash, and a conservative debt profile with a senior debt-to-EBITDA ratio of just 0.25 times. The board approved an 11% dividend increase, reflecting confidence in future performance.

Total has announced a $61.9 million capital budget for 2025, with $34.3 million dedicated to equipment upgrades and growth opportunities. Chief Executive Officer Daniel Halyk indicated current market conditions make share buybacks “extremely compelling” and remains optimistic about long-term energy demand despite industry cycles.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alvopetro Energy and Total Energy Services. The Motley Fool recommends Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy.

More on Energy Stocks

person with spyglass looks at ocean horizon
Dividend Stocks

This 5.9% Dividend Stock Is One I’ll Never Sell — Here’s Why

This Canadian dividend stock has a great combination of a 5.8% dividend yield, resilient cash flow, and billions of dollars…

Read more »

a person watches a downward arrow crash through the floor
Energy Stocks

This Undervalued Dividend Stock Yields 4.3% and Keeps Growing

TC Energy (TSX:TRP) is an undervalued dividend titan to buy as shares come in further.

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

Here’s the 5.9% Dividend Stock I Can’t Get Enough Of

With this Canadian dividend stock yielding 5.9% again after a recent pullback, here’s why it could be one of the…

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

1 Dividend Stock That’s Beaten the Big Banks for Income Investors

This Canadian stock offers a 26-year dividend-growth streak with record production, strong cash flow, and meaningful long-term growth potential.

Read more »

Senior uses a laptop computer
Energy Stocks

Taking CPP at 70 Isn’t Automatically Smarter: Here’s the Number I’d Check First

Delaying CPP until 70 produces a much larger payment, but retirees give up five full years of income.

Read more »

some investments are riskier than others
Energy Stocks

3 High-Yield Dividend Stocks Worth the Risk Right Now

These three high-yield dividend stocks offer income and different risk profiles across pipelines, banking, and Canadian real estate.

Read more »

dreaming of financial success
Energy Stocks

Government Bonds Are Paying More: I’d Still Buy This Canadian Dividend Stock for the Next 10 Years

Government bonds now offer competitive income, but a growing dividend can become more valuable over a long investing horizon.

Read more »

golden sunset in crude oil refinery with pipeline system
Energy Stocks

TC Energy Is Selling its Mexican Pipeline for $560 Million: What Investors Need to Know

TC Energy keeps its broader Mexican network, trades about 17% below analyst targets, and yields roughly 4.2%. Notably, the stock…

Read more »