Small-cap growth stocks have markedly underperformed the S&P 500 over the past three years. This trend is largely due to rising interest rates and investors’ preference for a handful of large-cap companies specializing in artificial intelligence and weight loss drugs.
However, with the Federal Reserve expected to lower rates later this year, small-cap growth stocks could be on the cusp of a significant trend reversal. Which small caps should you keep an eye on in light of this potential catalyst?
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Prime Medicine (NASDAQ: PRME) and Tilray Brands (NASDAQ: TLRY) are two small-cap growth stocks that have struggled in the current high-interest-rate environment but now appear significantly undervalued from a long-term perspective. Here’s a quick rundown of why these two high-risk, high-reward growth stocks might be worth buying right now.
Prime Medicine: A genomic medicine play
Genomic medicine is revolutionizing our approach to a multitude of complex diseases. Prime Medicine, a preclinical biotech, is spearheading the effort to bring a powerful new technique to this field called “prime editing.”
Why is Prime Medicine stock worth considering? The company is gearing up to launch its first human trial later this year. The candidate, PM359, is a prime-edited cell therapy indicated for a rare, inherited condition known as chronic granulomatous disease (CGD).
What’s the investing angle? If PM359’s early data are positive, it will go a long way toward validating this next-generation approach to gene editing. That’s a big deal because Prime Medicine has designs on developing several additional therapies that could one day be blockbuster products.
What’s the risk? While prime editing is an intriguing concept, this technology is still in its infancy, which poses a bevy of unique risks for early shareholders. Thus, this speculative growth stock is probably best suited for aggressive investors looking for asymmetric risk-to-reward opportunities and who are prepared to hold for the long term.
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Tilray Brands: A cannabis pioneer
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