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3 Top Small-Cap Stocks to Buy in May

By Rick Munarriz – May 19, 2017 at 9:20AM

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Axon, TrueCar, and The Trade Desk are well positioned to move higher in the coming weeks.

The market's showing signs of volatility these days, but risk-tolerant investors will also tell you that there's opportunity in the chaos. Stocks never stand still, and small-cap stocks in particular tend to have some pretty wild swings when the market's on the move. 

Opportunities are everywhere these days. Let's take a look at some of the small-cap stocks -- commanding market caps of $2 billion or less -- that are positioned to move in the coming weeks.

A policeman wearing an Axon body camera.

Image source: Axon Enterprise. 

Axon Enterprise (AXON 0.83%) -- $1.3 billion market cap

The company formerly known as Taser International rebranded itself as Axon last month, the name of its wearable cameras that are popular with police departments. Axon still makes the stun guns that put it on the map, but the real driver these days is its now namesake line of body cameras and the platform that is used to store the recorded footage. Axon's rebranding came with an aggressive introductory promotion to get more police departments on its platform.

The old model was working just fine. Axon has posted double-digit revenue growth for five consecutive years, and the pace has been accelerating in recent quarters. Axon is serving the right niche at the right time. When police confrontations don't go according to plan Axon's Taser guns are there for non-lethal solutions and its Axon cameras are there to collaborate arrest reports.

TrueCar (TRUE 11.45%) -- $1.6 billion

Some stocks seem to get totaled, only to piece themselves back together and get back on the road again. TrueCar appeared to be left for dead two summers ago when its stock bottomed out near $4. The provider of leads to automakers and historical sales information to potential car buyers had just lost its biggest partner, and showrooms in general were skittish about how much margin-gnawing transparency TrueCar was revealing to the public.

TrueCar shook things up. It brought in a new CEO who would go on to tweak its model in a way that was fair to both parties. Growth has returned, and a return to profitability is now just a couple of quarters away. TrueCar stock has more than quadrupled since bottoming out in 2015, up 335% in the process.

The Trade Desk (TTD -0.17%) -- $2 billion

Programmatic advertising is where marketing dollars are flocking to these days, and Trade Desk is a pioneer in the niche where ad buys are software-driven. Trade Desk is on a roll. Revenue climbed 76% in its latest quarter. It also boosted its guidance.

The Trade Desk went public at $18 late last year, and it has gone on to nearly triple in its wildly successful rookie season. Competition will intensify in the future, but for now Trade Desk is making the most of its niche leadership position.

Rick Munarriz owns shares of Axon Enterprise. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool recommends The Trade Desk and TrueCar. The Motley Fool has a disclosure policy.

Stocks Mentioned

Axon Enterprise Stock Quote
Axon Enterprise
$185.56 (0.83%) $1.53
TrueCar Stock Quote
$2.77 (11.45%) $0.28
Trade Desk Stock Quote
Trade Desk
$52.05 (-0.17%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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