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3 Top Small-Cap Stocks to Buy in June

3 Top Small-Cap Stocks to Buy in June

Posted On June 4, 2019 1:44 pm
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Small-cap stocks can be volatile, and they’re usually not as closely followed as the megacap stocks that dominate investors’ attention. But the best deals are often found where few people are looking.

We asked three of our Motley Fool contributors to each discuss a small-cap stock that investors should buy in June. Here’s what you need to know about Noble Midstream Partners(NYSE:NBLX)Tanger Factory Outlet Centers (NYSE:SKT), and Axsome Therapeutics(NASDAQ:AXSM).

Big-time yield and growth

Matt DiLallo (Noble Midstream Partners): The main draw of small-cap companies is that they typically boast big-time growth potential. That’s certainly the case with midstream specialist Noble Midstream Partners. The master limited partnership (MLP) is on track to grow its earnings 63% through the end of next year, fueled by the anticipated completion of several expansion projects, including its investment in two large-scale, long-haul pipelines. That high-octane earnings growth rate could quickly push the company’s market value out of small-cap territory.

Meanwhile, Noble Midstream should be able to continue growing earnings at a healthy rate beyond next year. Driving that view is its strategic position in two of the country’s fastest-growing shale plays: the DJ Basin and Delaware Basin. As production in those regions keeps expanding, it will drive the need for the MLP to continue building out additional midstream infrastructure.

Noble Midstream’s fast-paced earnings growth will provide it with significant cash flow. While the company will use some of that money to continue building new infrastructure, it also expects to keep increasing its high-yield dividend at a rapid pace. The MLP already has an above-average yield of 8.1%. However, it currently intends on increasing that payout at a 20% annual pace through 2022.

That above-average income stream that the company expects to increase at a fast pace should enable Noble Midstream to produce market-beating total returns, making it an ideal small-cap stock to buy this June.

A retail bargain

Tim Green (Tanger Factory Outlet Centers): This one isn’t for the faint of heart. Tanger is a real estate investment trust (REIT) that owns a few dozen outlet centers across the U.S. Store closings and retailer bankruptcies have been hurting the REIT’s results, and the company expects those pressures to continue. Tanger sees its average occupancy for 2019 coming in between 94% and 94.5%. That metric hasn’t fallen below 95% in more than 25 years.

While the upheaval in the retail industry is taking its toll on Tanger’s performance, it would be a mistake to…

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