Where to invest $1,000 right now: Five small caps set to rise in next 12 months
In a stable environment, small caps rise the fastest, as they are more sensitive to the economy and corporate earnings / Photo: crbellette / Shutterstock.com
Since the start of the year, the small- and mid-cap segment has shown a notable recovery: the Russell 2000 index has gained more than 12%, while the broader S&P 500 is up less than 5%. Volatility remains elevated amid geopolitical uncertainty and turbulence in commodity markets. In this environment, Freedom Finance Global analyst Georgy Timoshin suggests viewing the market through a balance of two factors: economic growth and inflationary pressure. Based on this approach, he has come up with five stocks with solid upside over the next 12 months.
Inflation and growth
Expectations for U.S. GDP growth remain at a level that allows the economy to expand without overheating: the Bloomberg consensus sees GDP growth in 2026 at 2.2%, as of April 17, versus 2.0% at the start of the year. Consensus expectations for corporate earnings growth among companies in the S&P SmallCap 600 stand at 15.45% for 2026, up from a previous forecast of 14.8%, Timoshin noted.
At the same time, while at the start of the year the market expected two Fed rate cuts totaling 50 basis points, expectations have since shifted. The Bloomberg consensus now points to higher inflation and a neutral monetary policy path, Timoshin said. He emphasized that markets do not view the current rise in inflation as a systemic threat to the economy: inflationary pressure is expected to ease as the situation around the Strait of Hormuz normalizes and energy prices cool off.
Freedom's picks
Against a relatively stable backdrop, further recovery in procyclical segments – particularly small caps, which are sensitive to economic cycles – is likely, Timoshin said. He believes investors should build their strategy around this trend: gradually increasing exposure to such stocks, with a focus on companies with strong fundamentals and sector support. Below are the names Timoshin recommends.
Astec Industries
A company that manufactures equipment for road construction, asphalt plants, aggregate processing, and other construction materials, Astec Industries (ASTE) is positioned to benefit from rising infrastructure spending in the U.S. – it is one of the key suppliers of equipment for the road-building and construction sector.
In the medium term, Astec’s growth drivers are the extension of federal infrastructure programs in the U.S., synergy from new assets, and further improvement in its earnings structure. This is particularly important because a rising share of service and aftermarket revenue makes financial results more stable and less dependent on the cyclicality of new equipment sales.
The company is gradually improving operating efficiency, expanding margins, and maintaining a relatively stable financial position despite higher debt following M&A deals.
Since the start of the year, Astec shares have gained more than 30%. According to MarketWatch data, the stock has two ratings, both “buy.” The target price over a 12-month horizon, according to Freedom Broker analysts, is $66 per share, implying nearly 15% upside from the Wednesday close.
Trilogy Metals
Trilogy Metals (TMQ) is a mining company developing base metal deposits in Alaska, including the Arctic and Bornite projects, through a joint venture with South32.
The investment case is built on the quality of reserves and the strategic importance of copper. The key asset is the Arctic project, which has high metal grades and potentially low production costs, while Bornite adds scale and long-term growth. The partnership with South32 and support from the U.S. government reduce financial risks and underscore the strategic importance of the projects.
An additional driver is rising demand for copper amid electrification and the development of new technologies. Trilogy Metals currently has sufficient liquidity, but it does not generate revenue and is primarily exposed to regulatory risk.
Trilogy Metals currently has three “buy” ratings from Wall Street analysts, while two recommend “hold.” Since the start of the year, the stock has gained nearly 7%, and over the last year it has risen 175%. The 12-month target price from Freedom Broker is $6.20 per share, implying nearly 35% upside from the Wednesday close.
Taylor Devices
Taylor Devices (TAYD) operates in the niche of shock and vibration mitigation systems and participates in key defense and infrastructure projects. The company benefits from stable demand from military customers and rising production at major contractors such as Lockheed Martin and RTX.
Against the backdrop of heightened interest in the defense sector, the market, in our view, is too focused on short-term factors – pressure on the order backlog and shifts in contract timing – and underestimates Taylor Devices’ resilient demand, strong positioning, and growth potential.
Despite temporary contract delays, the management has not signaled a decline in production and even allows for capacity expansion over the next 2-4 years, indicating sustained demand.
The investment case is based on normalization of the contract cycle and revenue recovery. An additional driver is the development of the Taylor Damped Moment Frame (TDMF) segment: the first order has already been received, and potential inclusion in building codes could expand the addressable market. Support also comes from the macro backdrop – rising U.S. defense spending, with the fiscal-2027 budget targeting around $1.5 trillion, boosting demand across the supply chain.
Since the start of the year, Taylor Devices shares have been unchanged, while over the last year they have risen 89%. The stock has one rating, a “hold.” The 12-month target price from Freedom Broker is $67 per share, implying 14.5% upside from current levels.
Aeluma
Aeluma (ALMU) is a high-tech semiconductor developer at a commercialization inflection point. Its key advantage is a technology capable of significantly reducing the cost of SWIR sensors and moving them from niche applications into mass markets.
By combining new and existing technologies, Aeluma could reduce sensor costs by roughly tenfold and enable broader adoption – in smartphones, AI infrastructure, and automotive LiDAR systems.
The target market is estimated at around $4.7 billion by 2030, with demand driven primarily by mobile devices, data centers, and automotive applications. The company already has more than 20 active customer projects, while support from government contracts, including NASA and DARPA, reduces technological risks and supports scaling efforts.
Aeluma remains at the investment stage for now, but the company is expected to reach profitability by 2028 and will be able to scale it rapidly as revenue grows, Timoshin said. The main risks are delays in scaling laboratory processes, dependence on large clients, and competition from alternative technologies.
Over the last year, Aeluma shares have gained 150%. Following trading on Wednesday, the stock surged 22% after the company received a NASA contract for integrated quantum dot lasers for data transmission and sensing systems. The stock currently has three “buy” ratings. The target price from Freedom Broker analysts is $23 per share, implying 8.5% upside from the Wednesday close.
NorthEast Community Bancorp
NorthEast Community Bancorp (NECB) is a regional bank focused on financing construction projects and residential real estate in New York and surrounding areas. The investment case is tied to its exposure to local housing markets with constrained supply, where steady demand supports a stable and high-quality loan portfolio.
The bank’s key advantage is high profitability – it demonstrates a strong net interest margin, high return on equity, and efficient cost control alongside a solid capital position. Additional appeal comes from low levels of non-performing loans and consistent organic capital growth without the need for large transactions or external funding.
Shares of NorthEast Community Bancorp are trading at a notable discount to book value and the multiples of comparable banks, despite higher profitability. The main risks are a potential decline in net interest margin amid Fed easing, dependence on wholesale funding, and high concentration in construction lending.
NorthEast Community Bancorp shares have risen 8.7% since the start of the year. According to MarketWatch data, the stock has one “buy” rating and one “hold.” The target price from Freedom Broker analysts is $30 per share, implying around 22% upside.
