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.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

“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. 

“Best Buys Now” Pick #2:

Redacted

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool UK has recommended On The Beach Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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