Wall Street has been reeling under severe volatility since the beginning of 2022 after finishing impressively in the last two coronavirus-ridden years. Small business operators suffered the most during the pandemic. The nightmare of these companies continues this year too owing to record-high inflation, a higher interest rate regime and the ongoing Russia-Ukraine war.

Nevertheless, despite various hurdles, several small-cap (market capital < $1 billion) stocks are flying high this year. Investment in these stocks with a favorable Zacks Rank is likely to strengthen one’s portfolio in an otherwise tough environment. Five of them are — SilverBow Resources Inc. , Hudson Technologies Inc. (HDSN Quick QuoteHDSN - Free Report) , Intrepid Potash Inc. (IPI Quick QuoteIPI - Free Report) , Pangaea Logistics Solutions Ltd. (PANL Quick QuotePANL - Free Report) and Civeo Corp. (CVEO Quick QuoteCVEO - Free Report) .

Immediate Concerns

The major issue for U.S. small businesses is galloping inflation, which is currently at its 40-year high. The global breakdown of supply-chain systems due to the pandemic and shortage of manpower has hurt these companies the most. Small businesses are unable to pass on the total hike in input costs to their final products deteriorating their financial conditions.

China is yet to recover fully from the resurgence of COVID-19. Moreover, the prolonged war between Russia and Ukraine has made inflation the worst. Prices of commodities, especially crude oil and natural gas remain elevated due to the war.

More painful is that together Ukraine and Russia were the largest wheat exporters globally. Food inflation has jumped after several Asian and African countries decided to ban exports of agricultural and poultry products.

The Fed has already hiked the benchmark lending rate by 75 basis points and given a clear indication of two more rate hikes of 50 basis points each in June and July. The central bank terminated the $120 billion monthly quantitative easing program in March and will start shrinking its $9 trillion balance sheet from June.

Market participants are expecting the Fed to take a harsher strategy to combat inflation. On May 12, Fed Chair Jerome Powell admitted that he cannot give any guarantee for a soft landing of the economy under a higher interest rate regime.
Small businesses operate on a thin profit margin and most new businesses will take time to achieve profitability. Moreover, these companies, have no geographical diversification and depends on U.S. consumers.

5 High-Flying Small Caps Despite Hurdles

We have narrowed our search to five small cap stocks that have provided double digit returns year to date, in contrast to the southbound movement of all major indexes. These stocks have positive growth potential for 2022 and have seen solid earnings estimate revisions in the last 30 days. Finally, each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Image Source: Zacks Investment Research

Hudson Technologies is a leading provider of innovative solutions to recurring problems within the refrigeration industry. HDSN’s proprietary RefrigerantSide Services increase operating efficiency and energy savings, and remove moisture, oils and other contaminants frequently found in the refrigeration circuits of large comfort cooling and process refrigeration systems. In addition, Hudson Technologies sells refrigerants and provides traditional reclamation services to the commercial and industrial air conditioning and refrigeration markets.

HDSN has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 76.9% over the last 30 days. The stock price has soared 120% year to date.

Pangaea Logistics operates as a global logistics company. PANL provides seaborne drybulk transportation services. Pangaea Logistics provides logistics services to a broad base of industrial customers that require the transportation of a wide variety of dry bulk cargoes, including grains, pig iron, hot briquetted iron, bauxite, alumina, cement clinker, dolomite, and limestone.

PANL has expected earnings growth of 18.4% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 32.5% over the last 30 days. The stock price has jumped 75.4% year to date.

SilverBow Resources is engaged in the exploration, development and production of oil and natural gas properties. SBOW’s primary projects include the Eagle Ford wells, Burr Ferry, South Bearhead Creek and Lake Washington fields. SilverBow Resources Inc.

SilverBow Resources has expected earnings growth of 97.7% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 10.8% over the last 30 days. The stock price has climbed 60.6% year to date.

Intrepid Potash is the largest producer of potash in the United States and is dedicated to the production and marketing of potash and langbeinite, another mineral containing potassium. IPI owns five active potash production facilities -- three in New Mexico and two in Utah.

Intrepid Potash has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 34% over the last 30 days. The stock price has surged 50.6% year to date.

Civeo is a leading provider of long-term and temporary remote site accommodations, logistics and facility management services. CVEO operates in active oil, coal, natural gas and iron ore producing regions, including Canada, Australia and the United States.

Civeo has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has improved 68.8% over the last 30 days. The stock price has advanced 42.5% year to date.