Best Small Cap Stocks UK – Invest with 0% Commission

Small-cap stocks are often overlooked by investors, but they offer potentially larger gains than well-known companies. Small caps have enormous growth prospects since they typically haven’t saturated their markets.

Of course, small cap stocks also come with a fair amount of risk. Although these are strong companies in many cases, the stocks can be more volatile and harder to find analyst research on. We’ll highlight the 10 best small cap stocks to buy in 2021 and show you how to invest today.

Top Small Cap Stocks Stocks 2021

There are thousands of small cap stocks trading on the New York, London, and NASDAQ stock exchanges, which can make finding small cap stocks difficult. We’ve put together a list of the 10 best small cap stocks you can buy in 2021 – let’s take a closer look:

  • Axos Financial – Online Lending Discounted by Pandemic – Invest Now
  • Waitr Holdings – Cheap Food Delivery Stock – Invest Now
  • Quartix – Growing Fleet Management Provider – Invest Now
  • Smith and Wesson – Gun Maker with Political Volatility
  • Surface Transforms – UK Brake Manufacturer
  • Novavax – COVID-19 Vaccine Developer
  • Unisys – IT Business Flush with Cash
  • Vista Outdoor – Outdoor Products for Hunting and Recreation
  • Shield Therapeutics – Biotech Company with a Novel Drug
  • Advanced Medical Solution – Poised for a Rebound in Elective Surgeries

Best Small Cap Stocks UK Reviewed

1. Axos Financial – Online Lending Discounted by Pandemic

Axos is an online-only lender and financial services company that was hit hard by the coronavirus pandemic. Unlike some of its peers in the finance industry, Axos doesn’t have an investment banking industry. So it faced a slower recovery thanks to a drop in interest rates and lending.Axos Financial Chart

However, Axos is still a strong long term investment. The company has a rock-solid loan portfolio, with more than 95% of its loans backed by assets like homes and vehicles. In addition, Axos’s online-only model makes it much more profitable than competing banks, so it wins even when it undercuts competitors’ interest rates. Finally, Axos has an exclusive partnership with H&R Block that gives it access to a huge base of consumers.

The Axos share price has a lot of momentum right now and has gained over 90% since September. The company is still trading with a modest PE ratio of 12.8, though, so you don’t have to worry about overpaying.

Your capital is at risk.

2. Waitr Holdings – Cheap Food Delivery Stock

Waitr Holdings had a breakout 2020. The company’s shares gained a whopping 694% last year, yet it’s still trading at just 20 times forward earnings.Waitr Holdings Chart

Waitr is a food delivery company competing with the likes of DoorDash and Grubhub. But whereas Doordash and others mostly serve city markets, Waitr Holdings operates in rural and exurban areas. That’s a hard logistical nut to crack, but Waitr has managed to solve it while actually turning a profit – in fact, it’s one of the only companies in this sector to notch a profit in any quarter.

It’s entirely possible that Waitr will get acquired by a larger competitor, which would send the share price soaring. But even if it doesn’t, we think the company’s steady revenue growth will deliver gains for investors in the long term.

Your capital is at risk.

3. Quartix – Growing Fleet Management Provider

Quartix is one of the best UK small cap stocks in our opinion. This fleet management company provides subscription-based software that tracks vehicles and drivers. Before the COVID-19 pandemic struck, the company was adding customers at a rapid pace. Although that growth halted during the pandemic, Quartix is optimistic that sales will pick up again as people go back to work in large numbers.Quartix Chart

Importantly, Quartix could also be a big winner of the shift towards delivery. As more businesses work out their own delivery networks and existing delivery fleets get bigger, the market opportunity for Quartix’s software solutions only grows.

The company’s PE ratio of 30.8 reflects this future opportunity. However, considering that Quartix shares ended 2020 at virtually the same level they started the year at, we think the stock has plenty of room to run.

Your capital is at risk.

4. Smith and Wesson – Gun Maker with Political Volatility

For risk-tolerant investors who are willing to play with political fire, Smith and Wesson is worth a look. This US gun maker’s share price rises and falls with political winds – shares slowly trended downward during the gun-friendly Trump administration, then shot upwards during the civil unrest last year and spiked again after the election of Joe Biden.Smith and Wesson Chart

In the short-term, Smith and Wesson could see further appreciation thanks to attempts at firearm regulations under a Democratic administration in the US. On the other hand, successful regulations could hurt the shares in the long term. So, tread carefully around this stock and treat it as a high risk investment.

Smith and Wesson is currently trading with a PE ratio of 30.2, which is somewhat pricey for a company that’s been around since the 19th century. It also pays out a dividend yield of nearly 1%.

Your capital is at risk.

5. Surface Transforms – UK Brake Manufacturer

Surface Transforms is another UK small cap stock worth watching. This company makes ceramic brakes for vehicles, the market for which is estimated to be worth around £200 million per year.Surface Transforms Chart

Right now, that market is dominated by a rival brake manufacturer owned by BMW. Many of BMW’s competitors don’t want to help a rival, so the sector is ripe for disruption. Surface Transforms is well on its way to being that disruptor after winning a handful of new supply contracts last year. In fact, the company is expecting to be profitable this year for the first time, which should give the share price a jolt.

Your capital is at risk.

6. Novavax – COVID-19 Vaccine Developer

Novavax was one of the big winners of the coronavirus pandemic. This biotech company began developing its own vaccine candidate at the outset of the pandemic, and investors drove up the stock over 3,200% in response. The company just launched a Phase 3 clinical trial and early results could come out as soon as March.Novovax Chart

At the same time, the company has a new flu vaccine, called NanoFlu, in the works. Both NanoFlu and the COVID-19 vaccine could hit the market next year, which would yield huge gains for Novavax investors. The market for both vaccines is global – and despite vaccines from Pfizer and Moderna rolling out, many countries are still in need of millions of vaccine doses.

Novavax isn’t profitable yet, and the shares are trading at an extremely high market capitalization compared to the start of 2020. Still, based on an estimate of potential revenue if both vaccines are approved, the current PE ratio could be as low as 8.

Your capital is at risk.

7. Unisys – IT Business Flush with Cash

Unisys is one of the most undervalued small cap stocks on the market in our opinion. This company is trading with a PE ratio of just 1.5. That’s incredibly low for a company that provides IT services, an extremely hot and fast-growing market sector.Unisys Chart

What’s even more exciting about Unisys is that it sold off a portion of its business for 13 times its earnings last year, just before the COVID-19 pandemic hit. That’s a massive multiple that increases the company’s valuation by a huge degree compared to its share price. Unisys is planning to use the cash to pay down debt and open up growth options, which is music to the ears of long-term investors.

Unisys’s stock price has more than doubled since October. But with no signs of slowing momentum, now is potentially a great time to get in on this small cap IT stock.

Your capital is at risk.

8. Vista Outdoor – Outdoor Products for Hunting and Recreation

Vista Outdoor, which owns a number of outdoor recreation and hunting brands, had a strong 2020. The company’s shares grew 300% as outdoor activities were among the only options available to consumers in the US last year. The company saw another bump in November and December thanks to a spike in ammunition sales around the election of Joe Biden.Vista Outdoor Chart

The company is also looking attractive thanks to its recent growth in eCommerce. Gross profit from online sales grew 79% in the fourth quarter, and earnings jumped from $0.01 in Q4 2019 to $1.10 in Q4 2020. Vista has a forward PE of just 10.7, making it attractive as an undervalued small cap stock.

Your capital is at risk.

9. Shield Therapeutics – Biotech Company with a Novel Drug

Shield Therapeutics, which makes a drug for iron deficiency anemia, lost more than 70% of its share value last year as COVID-19 took center stage. However, that poor performance hides the fact that Shield Therapeutics received regulatory approval for its flagship drug and the company has now moved onto commercial distribution.Shield Therapeutics Chart

The next challenge ahead for Shield is moving into global markets. The company already has a deal in place that will allow sales in China as soon as 2023, and it’s actively pursuing distribution in the US. Such a deal would almost certainly give the stock a boost, and favorable terms could be a huge win for investors.

Shield Therapeutics isn’t yet profitable, but the light at the end of the tunnel is getting close. Once royalties start rolling in for its iron deficiency anemia drug, the company should report a profit. The company anticipates profitability in mid-2022, so then might be time to look at investing in the best biotech stocks!

Your capital is at risk.

10. Advanced Medical Solution – Poised for a Rebound in Elective Surgeries

Advanced Medical Solutions, a UK small cap stock focused on surgical technology, was hit hard by the COVID-19 pandemic. Elective surgeries came to a near halt, and the stock dropped 12% for the year while the overall stock market was rising.Advanced Medical Solutions Chart

That said, we think this offers an opportunity for UK investors. The company is currently trading at a discount because of the drop in sales during 2020, but the vaccine rollout means that surgeries could resume at a regular pace as soon as this summer. Advanced Medical Solutions also acquired a key supplier in November, which could help the company cut costs and further improve its products.

Your capital is at risk.

What Are Small Cap Stocks UK?

Small cap stocks are any stocks with a market capitalisation between $300 million and $2 billion. By contrast, mid cap stocks have a market cap between $2 billion and $10 billion, and large cap stocks have a market cap of over $10 billion.

You might be surprised at how many small cap stocks are out there. These companies often don’t have the name recognition of their larger peers and they aren’t on the major S&P 500 or FTSE 100 indices since these groups are based on market capitalisation.

However, there are thousands of small caps on the NYSE, NASDAQ, and London Stock Exchange. Collectively, they make up tens of billions of pounds in market value.

Are Small Cap Stocks UK  a Good Investment?

Small cap stocks are beloved by investors for their growth investors. Large cap companies like, say, Coca-Cola have already cornered global markets, so they don’t have much room to grow. The stock price can rise in response to increasing sales, but in general it’s rare to see double- or triple-digit gains from large cap stocks.

Small caps, on the other hand, routinely post double- and triple-digit annual returns. Often, these companies spend years developing a new product, and the shares can explode when that product finally makes it to market. Or small cap companies are able to move into new markets and act as disruptors. Small cap stocks are also acquisition targets for larger companies, which can send share prices flying.

The catch is that small cap stocks are also much riskier than their larger peers. If a small cap releases a new product, for example, and it has issues or doesn’t see wide adoption, then the stock can suffer badly. Many small cap stocks also have limited cash flow, so disruptions to their business can threaten bankruptcy.

How to Choose the Best Small Cap Stocks UK for You

One major thing that keeps many investors from trading small cap stocks is how difficult it can be to choose the right ones.

Finding small cap stocks worth investing in takes a ton of time. There are thousands of them, and very few receive attention from analysts. Creating a small cap stocks list and then researching all of the companies on it can be a full-time job.

There are several ways to go about finding worthwhile small cap companies. We recommend using a stock screener, which can help you narrow your search by stock market, industry, and key metrics like recent performance, profitability, and earnings. From there, though, you’ll still need to do the hard work of researching each individual company that appears in your small cap stocks list.

Once you’ve identified potential companies, look closely at fundamentals. Is the company profitable? If not, does it have a clear path to profitability? To get an idea of whether a stock is overvalued or undervalued, look at the PE ratio or price-to-sales ratio.

Of course, it’s also important to look carefully at market potential. Does the small cap company you’re researching have competition in its sector, or is it pioneering an entirely new product? What’s the size of the total market opportunity, and how much market share can that company reasonably expect to grab in the next several years?

All of these questions are important to consider when choosing the best small cap stocks for your portfolio.

Best Small Cap Stocks Stock Brokers in the UK

In order to buy small cap stocks in the UK, you’ll need a stock broker. Many brokers that have a limited selection of stocks only enable you to buy shares of larger companies. So, it’s important to look closely at what markets your broker has access to and whether you’ll have a wide selection of small cap shares available.

In addition, it’s important to look at other factors that will affect your trading. For example, commissions and fees can quickly eat into your profits. We recommend looking for commission-free brokers whenever possible.

Trading tools are also critical. For finding small cap stocks, you’ll need access to tools like a stock screener, detailed fundamental data, price charts, and analyst research.

With all that in mind, let’s take a closer look at two of the top UK brokers you can use to buy small cap shares today:

1. eToro – Buy the Best Small Cap Stocks with 0% Commission

eToroetoro logo offers trading on thousands of shares, including over 800 from the US and hundreds more from the London Stock Exchange. While you’re more likely to find mid cap and large cap stocks on eToro, the broker does carry many of the best small cap stocks we highlighted. In addition, you get access to over 450 ETFs and emerging stock markets in Asia, Africa, and South America, which are flush with growing companies.

One of the best things about eToro is that stock CFD trading is completely commission-free. The broker’s spreads are also below the industry average, minimising the amount you pay to trade. eToro also offers share dealing, which is commission-free for most US shares. The only extra fees to note on eToro are a £4 withdrawal fee and a £15 inactivity fee that takes effect after one year.

eToro offers a ton of trading tools to help you find high growth small cap stocks. Every company has its own page with detailed fundamental information, price targets from professional analysts, and highly detailed technical charts. eToro doesn’t have a stock screener, but you do have the option to sort stocks by market.eToro Research Price Targets

67% of retail investor accounts lose money when trading CFDs with this provider.

Another key feature that this broker brings to the table is a social trading network. You can connect with millions of other small cap investors from around the world to share ideas, which makes it much easier to find worthwhile companies. On top of that, eToro allows you to see whether investors are buying or selling shares of a particular company. You can also copy the portfolios of professional small cap traders to invest in a basket of companies in seconds.eToro copy portfolios

eToro is regulated by the UK’s Financial Conduct Authority (FCA) and accounts are protected by the Financial Services Compensation Scheme. The broker also offers 24/5 customer support.

Pros:

  • Trade thousands of US and international stocks
  • Supports small cap ETFs
  • 0% commission stock CFD trading
  • Social trading network with copy portfolios
  • Regulated by UK FCA

Cons:

  • No stock screener
  • Small withdrawal and inactivity fees

67% of retail investor accounts lose money when trading CFDs with this provider.

2. Fineco Bank – Low-cost Share Dealing for Thousands of Small Caps

Fineco BankFineco logo is one of the largest banks in Italy and it also has a trading division that’s available to UK traders. Although it’s not the most well-known broker in the UK, Fineco has a lot to offer.

To start, you get access to thousands of shares from the UK, US, and Europe. All stock CFD trades are 100% commission-free, and share dealing starts from just £2.95 per trade for UK stocks. Fineco Bank also carries hundreds of ETFs, including a number of small cap ETFs. These carry a 0.25% fee, which works out better than a flat commission for many investors.

One thing we love about using Fineco Bank to invest in small cap stocks is that it offers a very robust stock screener. You can sort through the entire complement of stocks that Fineco offers by market cap, country, market sector, fundamentals, and recent performance. Even better, you can use a suite of visualization tools to compare the stocks in your results list to help you find potential small caps to buy.stock screener at Fineco

67% of retail investor accounts lose money when trading CFDs with this provider.

Fineco also puts a comprehensive trading platform, called PowerDesk, at your disposal. This charting software offers dozens of technical indicators and drawing tools. It’s also very customisable, so you can easily compare two or more small cap stock charts side-by-side.Fineco powerdesk

Fineco Bank is considered highly trustworthy since it’s a publicly-traded bank in Italy. The broker is regulated by the Bank of Italy, and all UK accounts are protected by the Financial Services Compensation Scheme.

Pros:

  • Commission-free stock CFD trading
  • Hundreds of ETFs with 0.25% fee
  • Includes global stock screener
  • PowerDesk charting software
  • Regulated by the Bank of Italy

Cons:

  • Modest commission for share dealing

Your capital is at risk.

How to Buy Small Cap Stocks in the UK

Ready to buy small cap stocks in the UK? We’ll show you how to get started with eToro, which offers 0% commission trading, thousands of shares from around the world, and a vibrant social trading network.

1. Create an Account

To get started, head to eToro’s website and click ‘Join Now.’ You can create a new account using your Google or Facebook logins or using your email address.Create an eToro account

67% of retail investor accounts lose money when trading CFDs with this provider.

In order to comply with UK anti-money laundering regulations, eToro requires you to verify your identity. You can complete this step online by uploading a copy of your passport or driver’s license. You’ll also need to upload a recent utility bill or bank statement that shows your current address.

2. Deposit Funds

Next, you can fund your new eToro account. The broker accepts a variety of payment methods, including credit or debit cards, bank transfers, or e-wallets like Neteller and Skrill. eToro requires you to deposit at least £140 when you open a new account.eToro deposit

3. Buy Shares

Now you’re ready to buy small cap stocks with eToro. From your account dashboard, search for the name of the company you want to buy. When it appears in the drop-down menu, click ‘Trade’ to open a new order form.Search Smith and Wesson on eToro

67% of retail investor accounts lose money when trading CFDs with this provider.

Enter how much money you want to invest in the small cap stock. You must invest a minimum of £40, but you can buy any amount over that since eToro supports fractional shares. Next, select a stop loss or take profit level if they are part of your strategy. If you’re trading CFDs, eToro also allows you to leverage your trade up to 5:1 if desired.

Once your trade is ready, click ‘Open Position’ to buy your first small cap stock in the UK.

Best Small Cap Stocks UK – Conclusion

Small cap stocks offer high growth potential compared to larger companies, although they also come with more risk. If you’re interested in small cap stock investing, you can use our list of the 10 best small cap stocks in 2021 to get started today.

Ready to buy your first small cap stock? Click the link below to sign up for an eToro account!

eToro – Buy Small Cap Stocks with 0% Commission

67% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

What is a small cap stock?

A small cap stock is any company that has a valuation (market cap) between $300 million and $2 billion. Small cap stocks often have low share prices, but the share price does not determine whether a stock is a small cap.

Can I buy small cap stocks through an ETF?

There are many ETFs that focus specifically on small cap stocks. Some of these funds track the popular Russel 2000 small cap index in the US, while others invest in small cap stocks from around the globe.

How do I use a stock screener to find small cap stocks?

You can use a stock screener to find small cap stocks by setting the market cap filter to a minimum value of $300 million and a maximum value of $2 billion. You’ll also want to use other filters, such as for industry or recent performance, to narrow down your screen results.

What is the AIM exchange?

The AIM, or Alternative Investment Market, is a sub-market on the London Stock Exchange where many small cap stocks are traded. If you’re looking to invest in UK small cap stocks, the AIM is a good place to start.

Are small cap stocks the same as penny stocks?

Small cap stocks are companies with market caps between $300 million and $2 billion. Penny stocks are stocks that have a share price under $5 per share. Many, but not all, small cap stocks do have a share price under $5 and they are also considered penny stocks.

About Michael Graw PRO INVESTOR

Michael Graw is a freelance journalist based in Bellingham, Washington. He covers finance, trading, and technology. His work has been published on numerous high-profile websites that cover the intersection of markets, global news, and emerging tech. In addition to covering financial markets, Michael’s work focuses on science, the environment, and global change. He holds a Ph.D. in Oceanography from Oregon State University and worked with environmental non-profits across the US to bridge the gap between scientific research and coastal communities. Michael’s science journalism has been featured in high-profile online publications such as Salon and Pacific Standardas well as numerous print magazines over the course of his six-year career as a writer. He has also won accolades as a photographer and videographer for his work covering communities on both coasts of the US. Other publications Michael has written for include TechRadar, Tom’s Guide, StockApps, and LearnBonds.

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