Please ensure Javascript is enabled for purposes of website accessibility

These 2 Soaring Micro-Cap Stocks Are Ignoring the Market's Monday Drop

By Dan Caplinger – Dec 20, 2021 at 9:15AM

Key Points

  • Markets were broadly lower near midday on Monday.
  • Fortuna Silver Mines rose after getting a favorable decision from Mexican regulators.
  • Bluerock Residential saw explosive gains in the wake of a buyout offer.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Neither of these companies is on many investors' radars, but both are moving higher on a down day for the broader stock market.

The stock market wasn't able to get past its recent turbulence to start the new week on Monday, and investors saw another sizable pullback in major market benchmarks. As of 12:15 p.m. ET, the Dow Jones Industrial Average (^DJI 1.26%) was down 624 points to 34,741. The S&P 500 (^GSPC 1.44%) had given up 78 points to 4,543, while the Nasdaq Composite (^IXIC 1.74%) had taken a 263-point hit to 14,906.

In general, small-cap stocks did even worse than their larger counterparts, with the Russell 2000 index falling almost 2.5%. However, a couple of micro-cap companies managed to post nice-sized gains to start the week. Below, we'll provide what for many investors will be an introduction to Fortuna Silver Mines (FSM 0.26%) and Bluerock Residential Growth REIT (BRG), and explain why their shares are moving higher Monday.

Fortuna looks shiny

Shares of Fortuna Silver Mines were up nearly 20% early Monday afternoon. The silver miner benefited from good news regarding one of its mines despite poor market conditions in the precious metals complex.

Variety of silver bars and coins.

Image source: Getty Images.

Fortuna received word from regulators in Mexico that the silver miner had received an extension for the environment impact authorization that allows it to operate its San Jose Mine in Oaxaca. The Secretaria de Medio Ambiente y Recursos Naturales (SEMARNAT) granted a 12-year extension to Fortuna.

The decision comes after a different regulator had initially denied Fortuna's request for an extension in November. That adverse decision had sent Fortuna's stock falling sharply. However, SEMARNAT found that Fortuna's operations at San Jose comply with the requirements from the initial authorization.

Unfortunately, silver prices have been in a slump lately, and that hasn't helped Fortuna's fortunes. Nevertheless, today's news at least ensures that the company won't lose its core revenue-generating asset.

Blackstone likes Bluerock

The really big winner among stocks on Monday was in another obscure corner of the markets. Bluerock Residential is a real estate investment trust, and its shares jumped more than 70% on news that it will get acquired by a giant in the investment management business.

Bluerock announced that the real estate arm of Blackstone Group (BX 2.44%) will acquire all of Bluerock's outstanding stock. The terms of the agreement include a $24.25-per-share cash payment to current Bluerock shareholders, valuing the REIT at $3.6 billion.

However, Bluerock shareholders will also get something extra. The REIT will spin off the assets of its single-family rental business to current investors, with an estimated net asset value of $5.60 per share. That will leave Blackstone holding Bluerock's multi-family and apartment properties.

There's some risk involved with the transaction, as Blackstone's commitment to purchase the bulk of Bluerock's assets is contingent on Bluerock successfully going through the spinoff transaction. Nevertheless, the big jump in the stock price reflects the huge demand for investable real estate assets. It'll be interesting to see whether similarly placed real estate investment trusts start to receive offers from other institutional investment companies -- and if so, whether the premiums to current share prices are as lucrative for current shareholders.

Dan Caplinger owns The Blackstone Group Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.