Just released: our 3 top small-cap stocks to buy before May [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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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

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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:

AG Barr (LSE:BAG)

Why we like it: AG Barr (LSE: BAG) is best known as the manufacturer of IRN-BRU, the refreshment drink of choice in Scotland. The brand owes its prominence to over a century of popularity – and that heritage should, in our view, help the company grow revenue, volume and profits over the long term. We reckon companies that have demonstrated long-term staying power – such as brands that have survived for 100 years or more – boast an attractive kind of resilience.

“The company also says it has a “proven brand-building capability”, which is behind its M&A strategy. Recently, it has acquired brands and broadened its portfolio – including Boost Drinks and Rio Tropical – where it believes it can spearhead continued growth, while taking margins higher. The company’s strong balance sheet – it had £54m net cash at year-end – gives it the flexibility to continue acquire companies while making capital investments in the business.”

Why we like it now: AG Barr’s latest fiscal year was a successful one for the Cumbernauld-based business. It grew sales by roughly 26% to £400m (or 8% excluding acquisitions) while adjusted profits were 16% higher at £50.5m. Strong cash generation helped it fund the £12.3m acquisition of Rio as well as make £17.8m worth of improvements at its production sites. Its £54m net cash position means that it should be able to continue investing even amid potentially adverse trading conditions. While there’s some risk posed by the transition to a new CEO, the company’s long-term track record is remarkable, and the valuation appears reasonable for what we believe is a quality company.

“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 A.g. Barr P.l.c. 

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