3 micro-cap names that may capture unicorn-like growth: Analyst

Wall Street is littered with unicorns that were less than magical for investors last year. These startups that were valued at over $1 billion in the private market couldn’t quite live up to their lofty expectations when they finally hit the public market. 

AdvisorShares’ CEO Noah Hamman tells Yahoo Finance that he’s focused on building a portfolio of potential unicorns outside of high-flying names, such as Casper (CSPR), which made a splashy, albeit lackluster public debut on Feb. 6.

Co-founders of sleep product company Casper: Luke Sherwin, Gabe Flateman, CEO Philip Krim, Jeff Chapin and Neil Parikh, left to right, pose for a photo outside of the New York Stock Exchange, before their IPO, Thursday, Feb. 6, 2020. (AP Photo/Richard Drew)

“We are looking for small and micro-cap stocks, which can provide a similar risk-return profit as private equity,” says Hamman. “We think it’s a significant area that’s overlooked by investors.”

Hamman points to three companies that are providing such returns: the biopharmaceutical company, Kodiak Sciences (KOD), Cardlytics (CDLX), a firm that tracks digital-spending habits, and the auto insurance company EverQuote (EVER).

They are current holdings in AdvisorShares’ Dorsey Wright Micro-Cap ETF (DWSH), which was launched in July 2018. 

“These are companies that have returned 100%, 200% to 300% over the course of the year,” says Hamman. 

“You have to be careful in that space. You don’t want to put all of your eggs in just a few baskets, but when you’re talking about what people would have wanted to see from something like a Casper IPO, you’re not finding it in those big unicorns, but you can find it in the smaller and the micro-cap areas of the market.”

Alexis Christoforous is a reporter and co-anchor of “The First Trade” on Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow her on Twitter @AlexisTVNews