Small-cap stocks have trailed their larger rivals for the last decade. The Russell 2000 Index that is comprised of 2,000 stocks with the smallest market capitalizations in the U.S. has risen 2.54% this year. That compares with a 13% year-to-date gain in the benchmark S&P 500 index. Over the last 12 months, the Russell 2000 has increased 11%.
Despite the underperformance, there are many great small-cap stocks that have outperformed the market and produced returns as strong or stronger than the biggest publicly traded companies. Loosely defined as companies with a market capitalization of $2.50 billion or less, many small-cap stocks operate niche businesses that give them an edge and wide competitive moat.
Here are small-cap savants: three stocks mastering the art of outsized returns.
Oil-Dri (ODC)
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It turns out that kitty litter is big business. Oil-Dri (NYSE:ODC) is a Chicago-based company that specializes in pet care and animal health products. Its biggest selling product is cat litter. In fact, Oil-Dri is the largest manufacturer of cat litter in the U.S. While it has more than 800 employees, its stock is firmly in the small-cap category having a market capitalization of only $605 million.
In 2023, Oil-Dri had sales of $413 million and profits of $28 million. Despite its small size, Oil-Dri punches above its weight in terms of performance. Over the last 20 years, ODC stock has risen nearly 2,500%, trouncing the 500% return in the S&P 500 index over the same timeframe. Oil-Dri has also increased its quarterly dividend payment for 20 consecutive years. Today, the company pays a dividend of 29 cents a share, giving it a yield of 1.40%.
In the last 12 months, ODC stock has gained 113%, including a 20% gain so far this year.
Consol Energy (CEIX)
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Pennsylvania-based Consol Energy (NYSE:CEIX) is small compared to most energy concerns. Its market cap is a little more than $2.50 billion. And Consol Energy operates in an unpopular area of the energy sector: coal. Like the other names on this list, Consol Energy benefits from being the leading provider of an unglamorous but necessary product. While its share price has dipped 1.3% this year, CEIX stock has increased 61% in the past 12 months and is up nearly 275% over five years.
Owing to the closure of most other coal companies amid the rise of cleaner burning fuels such as natural gas, Consol Energy today is the leading producer of high-BTU bituminous coal in the U.S., and operates the largest underground coal mine in the country. The company employs more than 1,500 people. CEIX stock looks like a bargain trading at only six times future earnings estimates. There’s no dividend, but the stock’s growth makes it an attractive option among small-cap stocks.
Miller Industries (MLR)
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Another small but mighty stock is that of tow truck maker Miller Industries (NYSE:MLR). Like a little engine that could, MLR stock has climbed 66% higher over the last 12 months, including a 41% gain this year. The company’s share price has more than doubled over the last five years. Despite the big run, Miller Industries stock still looks attractively valued trading at just 10 times future earnings estimates.
Although Miller Industries market capitalization is less than $700 million, the company pays a decent quarterly dividend of 19 cents per share, giving it a yield of 1.30%. Based in Chattanooga, Tennessee and in business since 1990, Miller Industries owes its success to the fact that it makes highly specialized tow trucks and towing equipment, and makes them better than any other company. Miller exports its products around the world.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.