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However, rising inflation, supply-chain logjams, reduced production, and an expanded trade deficit are worrying to investors regarding a potential market correction as a result. Because high-priced stocks could suffer a pullback if there is a market correction in the near term, we think micro-cap stocks from relatively stable industries could be smart bets now. Indeed, the iShares Micro-Cap ETF (IWC) has gained 8.9% over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 6.4% returns, indicating investors’ interest in micro-cap stocks given the support from the continuing low-interest-rate environment.
We believe undervalued micro-cap stocks Lee Enterprises, Incorporated (LEE), Friedman Industries, Incorporated (FRD), Lifeway Foods, Inc. (LWAY), and Educational Development Corporation (EDUC) are well-positioned to gain substantially in the coming months. Each of these stocks is rated ‘Strong Buy’ in our proprietary POWR Ratings system.
