I spend most of my time covering the largest Canadian stocks, and there’s good reason for that. Size matters for long-term investors, both in terms of the risk profile of companies one is considering (larger companies tend to have more established business models with larger moats) but also in terms of dividend and fundamental stability.
In this market, I do think sticking with larger-cap stocks makes sense. But there are some small-cap gems I also think are worth considering for those investors with a truly long-term investing time horizon and the ability to be patient.
One of my top picks in this regard right now continues to be The Metals Company (NASDAQ:TMC).
Here’s why.
Source: Getty Images
Deep sea mining could be the future
Vancouver-based The Metals Company (TMC) is a leader in developing deep-sea mining capabilities for critical battery minerals such as lithium. With above-ground mining activity increasingly being frowned upon in most jurisdictions, the company’s hope is that less-intrusive deep sea mining operations could be the solution for the renewable energy future.
That’s certainly a strategy worth considering, and it is one investors have started to get behind. That said, looking at the company’s stock chart above, it’s clearly been a rocky ride for the company that went public right around the peak of the market in the pandemic era.
That said, this stock’s recent uptick is indicative of increased investor demand for companies using innovative technologies to advance key secular pushes forward. TMC remains a company that is still at the mercy of regulators, but has seen some positive movement on this front, indicating that wider-spread mining operations could be around the corner.
Analysts seem to like this company’s’ prospects
Overall, Wall Street analysts covering the NASDAQ-traded company remain bullish, with the consensus rating on TMC stock being an overweight.
There’s good reason for such a view. TMC is valued at just $1.4 billion. And while the company has not produced any meaningful revenue since being in operation (and has burnt through a lot of cash), it’s also true that there’s been plenty of headway made on gaining approvals for mining operations.
If everything proceeds as expected, some analysts project TMC could achieve profitability by 2026, producing annual revenue growth in the 60–80% range. Such profitability would imply a much higher valuation, but we’re still a ways away from seeing these numbers actually roll in.
Thus, TMC could be my most speculative, highest-risk pick on my radar screen right now. But it’s one I felt compelled to share, and it is a name I continue to watch carefully.
