4 Small-Cap Technology Stocks That Belong In Your Portfolio

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The past year was no doubt one of the best years for tech stocks. This is apparent from the Technology Select Sector SPDR ETF (XLK)'s nearly 65% gain over this period. The tech sell-off, triggered by rising treasury yields and a sector rotation toward cyclical stocks, has eased as the Dow Jones and S&P 500 hit record highs recently.

Tech stocks are making a massive comeback, as disappointing jobless claims data and concerns over a fourth wave of the pandemic have rejuvenated the interest in pandemic beneficiaries. The optimistic market recovery outlook has led investors to bet on small-cap stocks as they have the highest growth potential compared to mid-cap and large-cap stocks. This is reflected in the Russell 2000 Index’s more than 13% gain year-to-date, compared to the S&P 500’s 9.1% return.

So it is wise to bet on small-cap tech stocks, such as CTS Corporation (CTS), Universal Electronics Inc. (UEIC), Aviat Networks, Inc. (AVNW), and Franklin Wireless Corp. (FKWL), as they have plenty of upside left.

CTS Corporation (CTS)

With a market cap of $1.01 billion, CTS operates as a manufacturer of sensors, electronic components, and actuators. Its products include sensors and actuators used in passenger or commercial vehicles, electronic components, switches, and fabricated piezoelectric materials and substrates. The company provides its solutions mainly to the OEMs in the aerospace, communications, defense, industrial, information technology, medical, and transportation markets.

CTS’ net sales of $123.02 million for the fiscal 2020 fourth quarter that ended Dec. 31, 2020 represents a 6.9% year-over-year rise. Its gross profit has increased 10.3% year-over-year to $42.69 million. The company’s net income has increased by 48.5% year-over-year to $14.95 million. Also, its adjusted EPS increased by 16.2% year-over-year to $0.43.

For the quarter that ended March 31, 2021, analysts expect CTS’ EPS and revenue to increase 105.3% year-over-year and 17.3% year-over-year, respectively. Moreover, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.

On Feb. 26, 2021, the company received a $1.50 million grant from the Office of Naval Research (ONR) to develop the next generation of piezoelectric materials. CTS, along with the strategic partner, Entekno Materials of Turkey, also secured funding from Eurostars in February for the development of ‘Environmentally Friendly Lead-Free Piezoelectric Ceramic Material.’ 

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