NEW YORK (
) -- We are entering a seasonally strong time of year for the stock market. This is because this is the period when institutional investors really get down to business with pension funding and other trading events. This seasonal phenomenon creates a spike in volume and very favorable conditions on Wall Street.
What's more, a very exciting fourth-quarter earnings season is under way, and companies are poised for some of the most impressive sales and earnings we've seen in the past decade. As the recovery takes hold, companies are seeing very favorable year-over-year comparisons.
Small-cap stocks are most favorably influenced by these trends, because smaller companies are more likely to gap up on higher volume and these trim, agile companies are the most likely to ramp up production and sales when things turn around.
To help you cash in on these seasonal trends, here are five top small-cap stocks to buy now.
Top Small-Cap Stock No. 1:
Australia-based InterOil is an integrated energy business that is on the cutting edge of the industry and continues to explore new finds in the quest for bigger profits.
Currently, IOC is developing some very rich natural gas fields in Papua New Guinea and the surrounding region. This is in addition to an existing a 36,000 barrel-per-day refinery and retail assets in the region. In the past three months, the analyst community has revised its consensus earnings estimate 33.3% higher, and it should perform very well when it reports earnings in the coming weeks.
Top Small-Cap Stock No. 2:
Sharps Compliance provides medical waste disposal solutions for the health care industry and consumers in the U.S. Its most innovative product, the Sharps Disposal by Mail System, actually allows providers and individual consumers to safely get rid of used needles like they were mailing a letter.
This amazing company is booming right now, with its latest earnings soaring 1,000% to $5.8 million compared with $605,000 a year ago. SMED is a great buy, but I must warn you that this is an aggressive, thinly-traded stock and can give you a wild ride. Only buy SMED with a limit order within 10 cents of its previous day's closing price to protect yourself.
Top Small-Cap Stock No. 3:
China Green Agriculture
China Green Agriculture is an innovative fertilizer company cashing in on the strength of China's agricultural industry by offering organic fertilizers and other products that are just as good for the environment as they are for farmers.
In its latest quarter, CGA's sales rose 45.8%, and earnings rose 242.9%, so it's safe to say that it pays to go green. China Green Agriculture should have another strong quarterly report in the near future that will likely send shares much higher.
Top Small-Cap Stock No. 4:
Sourcefire develops digital security and information management software for the government and private industry. Its innovative programming team is constantly upgrading features, staying one step ahead of the latest digital threats.
This stock was already booming, with a 35% jump in third-quarter sales, but the recent airline bombing attempt over the holidays has put security once again at the front of everyone's mind. That means big sales are in the works for FIRE. In the past three months, the analyst community has revised its consensus earnings estimate 31.8% higher, so I expect a big splash when this stock reports earnings in the coming weeks.
Top Small-Cap Stock No. 5:
Hi-Tech Pharmacal is another cutting-edge health care company. While big pharma is spending billions on research for the next blockbuster drug, HITK is finding innovative ways to challenge patents and deliver the same prescriptions to consumers at a much cheaper price.
Hi-Tech's latest earnings rose 566.7% to $7.4 million, or 60 cents per share, compared with $1.1 million, or 9 cents per share, in the same quarter a year ago. In the past month, the analyst community has revised its earnings estimate 29.6% higher in anticipation of another strong report in early 2010.
Editor's note: Please note that due to factors including low market capitalization and/or insufficient public float, we consider SMED, CGA and HITK to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
At the time of publication, Navellier was long IOC, SMED, CGA, FIRE and HITK.
One of Wall Street's renowned growth investors, Louis Navellier is the editor of four investing newsletters: Emerging Growth (formerly known as MPT Review), Blue Chip Growth, Quantum Growth and Global Growth. His longest-running publication, Emerging Growth, has a track record of beating the market nearly 3 to 1. Navellier is the author of a BusinessWeek bestseller, "The Little Book That Makes You Rich," and the chairman and founder of Navellier & Associates, Inc.