4 Small-Cap Names to Buy as Rotational Action Gains Momentum
Some reflexive sell-the-news action hit at the open on Tuesday, but the dip buyers stepped up and are now pushing the indices to intraday highs. There is a slight aroma of FOMO in the air as investors fear that things could keep running despite the extended technical conditions in some places.
Space Stocks Lead on SpaceX Excitement
The hottest group currently is space-related, with names like Redwire Corporation ($RDW), Rocket Lab Corporation ($RKLB), Spire Global, Inc. ($SPIR), the Tema Space Innovators ETF ($NASA) and Intuitive Machines, Inc. ($LUNR) gaining momentum on building excitement about the SpaceX IPO. The Tema Space Innovators ETF is interesting because it actually holds SpaceX shares through a Special Purpose Vehicle (SPV), making it a direct play on the IPO rather than just a sector proxy.
The Rotation Is Working
The Magnificent Seven ($MAGS) is lagging a bit, but the iShares Russell 2000 ETF ($IWM) is outperforming with a gain of 1.8%, and that confirms the rotational scenario I outlined in my opening column.
Rotation into small caps favors stock picking, and that is what I am doing. Four names I added to on Tuesday morning are Roku, Inc. ($ROKU), Precigen, Inc. ($PGEN), Cullinan Therapeutics, Inc. ($CGEM) and National Energy Services Reunited ($NESR).
4 Names I Am Adding To
Roku is primarily a technical play. It pulled back slightly after a breakout move and is now challenging recent highs. I like the valuation, with anticipated EPS growth of 314% in 2026 and 47% in 2027 off of a recovering earnings base. Revenues jumped 22% last quarter. According to TipRanks.com, the average target price is around $150.
Precigen is a small biotechnology stock I discussed recently. I have been doing more fundamental work on it, and that increased my confidence level greatly. One thing I find intriguing here is that renowned fund manager Bill Miller (William H. Miller III) has a 9.2% stake via a 13G filing, and his longtime protégé, Samantha McLemore, has a similarly sized stake through Patient Capital Management. The company has investor meetings coming up with both JPMorgan and Goldman Sachs.
Cullinan Therapeutics is another biotechnology name that has been under some pressure on confusing news, but it has data coming up in a presentation in a couple of weeks. This stock has significant upside on good results, and I expect some anticipatory buying.
National Energy Services Reunited is another stock I mentioned recently. It is a play on oil infrastructure construction in the Middle East and should benefit greatly if the Iran situation cools off. There is a lot of work to be done in the Middle East to avoid any further dependence on Iran. The chart looks favorable, but the stock is not well-known.
Strategy
I am looking for more opportunities to put cash to work, but I am not feeling pressure to move too quickly. I want to maintain a high level of flexibility as I expect higher levels of volatility and rotation on the news flow about Iran.
At the time of publication, DePorre was long ROKU, PGEN, CGEM, NESR and SPIR.
