Just released: the 3 best small-cap stocks to buy right now [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a portfolio of at least 15 small-cap stocks.

Mark Rogers

As the founder of The Twelfth Magpie, Mark approaches the stock market with the same old-fashioned business instincts and values that he honed growing up around the family business. An investor for 25 years, Mark specialises in unearthing top-quality under-the-radar investments in the small-cap market. He currently serves as Director of Investing for Twelfth Magpie services and Managing Director of The Twelfth Magpie.

Published 29 January, 2023 6:54 am GMT

| More on: OTB

Premium content from Motley Fool Hidden Winners UK

Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

“Best Buys Now” Pick #1:

On the Beach (LSE:OTB)

Why we like it: “Recommending or buying a company that’s so badly affected by Covid-19 obviously has its risks. However we have undimmed optimism regarding On The Beach’s asset-light approach to providing British consumers — as well as an increasing number of Scandinavian consumers — and high street travel agents an online platform to book sun-soaked holiday options.

Should you buy On The Beach Group Plc shares today?

Before you decide, please take a moment to review this report first. Despite ongoing uncertainties from US tariffs to global conflicts, Mark Rogers and his team believe many UK shares still trade at substantial discounts, offering savvy investors plenty of potential opportunities to learn about.

That’s why this could be an ideal time to secure this valuable research – Mark’s analysts have scoured the markets to reveal 5 of his favourite long-term ‘Buys’. Please, don’t make any big decisions before seeing them.

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“As we don’t believe the pandemic will significantly alter consumer habits or make international travel overly difficult in the long term, then the overall industry should bounce back just fine. And with competitors by and large in worse shape than itself, there’s a chance growth accelerates for On The Beach coming out of this crisis. But even if the company just keeps growing as it was and gets back to reliably growing profits and cash flow, we think it’s an interesting option at present.”

Why we like it now: The short-term outlook for discretionary consumer spending is, to put it mildly, not great. So why are we putting forward On The Beach as a Best Buy Now? Because the company is cash-rich with net cash of £64.5m as of the end of its year-end in September, is bouncing back from the pandemic with FY22 seeing a return to positive cash flow and statutory profits (albeit at lower levels than pre-pandemic given the ongoing travel restrictions through much of that period), and as an asset-light platform is well positioned to trim expenditures and conserve cash if consumer demand really drops off a cliff. Taking into account its large cash balance, On The Beach’s enterprise value at the time of writing was only £230m – which could be an attractive price to pay if the group can return to pre-pandemic levels of profitability and continue on taking share from legacy travel agents in the long-term. On The Beach is certainly a riskier option right now but for members who can tolerate and afford that heightened risk, we believe it’s worth taking a closer look at this month.