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3 under-the-radar small-cap stocks hitting all-time highs. Buy, hold or sell?

One way of making it big in the stock market is to find and buy promising small companies before the herd arrives. The trick is knowing when the latter has happened and then making an informed decision on whether to buy more, begin to sell or just continue holding.

With this in mind, here are three market minnows that have all been setting new share price highs recently. 

High flyers

£220m cap scientific instruments business Judges Scientific (LSE: JDG) has been in excellent form of late, rising 46% since January. If 2018’s numbers are anything to go by, there could be more to come.

Thanks to strong demand and foreign exchange tailwinds, revenues grew 9% (5.5% of which was organic) to a record £77.9m last year and adjusted operating profit jumped 35% to £14.7m.   

According to Chairman Alex Hambro, the new financial year has “started well” and the firm is “well positioned to face the uncertain macro and political climate“. The recent 25% hike to the total dividend backs this up this statement. 

Assuming analysts are correct in predicting a 23% rise in earnings per share in 2019, Judges’s shares are changing hands on a P/E of just under 19. With rising returns on capital and improving free cash flow, I rate the shares as a cautious ‘buy’.  

Despite its memorable ticker, I still think music hardware and software product supplier Focusrite (LSE: TUNE) is a company that the majority of retail investors won’t have heard of. Considering its share price is now over 70% higher than it was two years ago, however, this market leader is clearly getting more attention than it used to. 

It’s not hard to see why.

April’s half-year figures (covering the six months to the end of February) included a 4.1% rise in revenue to £40.4m and a very encouraging 22.6% jump in pre-tax profit to £7.2m. The interim dividend was lifted 20% and the company had net cash of a little over £26m on its balance sheet at the end of the period. 

Trading on 29 times forecast earnings, prospective buyers of Focusrite’s stock will need to be confident that management’s strategies to deal with import tariffs in the US and ongoing economic and political uncertainty will be sufficient to stop the share price losing momentum. A number of product launches planned for this year should also help.

That said, I wouldn’t be tempted to jump on board at this price. For those already holding, banking some profit feels prudent.

Liontrust Asset Management (LSE: LIO) is my final pick of firms whose shares are hitting all-time highs. 

Despite some in the industry experiencing problems of late, shares in the business have been solidly rising for the last three years. Had you purchased Liontrust back in June 2016, you’d have a stonking gain of around 180% now.

As my Foolish colleague Harvey Jones reported recently, the company’s latest set of results were certainly encouraging considering “recent market bumpiness“. 

Compared to peers, Liontrust’s shares still look reasonably priced on 14 times predicted earnings. A forecast 3.9% yield makes it the highest dividend payer of the three covered today and it also has net cash on its balance sheet. 

While nothing can be guaranteed when it comes to future performance, particularly for companies whose success is so reliant on general market sentiment, I reckon the shares could be another cautious buy.

Hidden Opportunity

The Alternative Investment Market (AIM) boasts the enviable record of being the most successful growth market in the world – so it makes sense to go digging for gold there, right? Well, plenty of companies have listed there and lost…

However, one strategy for capturing capital gains is to invest in expanding firms that have already proven their mettle with rising revenues, earnings and cash inflow – and we believe we’ve identified a small-cap winner with lots of ongoing growth potential in our recently refreshed report, “A Top Small-Cap Share From The Motley Fool”.

Further still, we’re giving away this research free of charge! Click here now to obtain your copy.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Focusrite and Judges Scientific. 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.