5 Promising Small-Cap Stocks Under $6

On the night of the U.S. Presidential election, I was rudely awakened by an alert siren on my trading station. Stumbling out of bed, I could not believe my eyes. Dow Jones futures were down nearly 800 points!

Just then my phone rang -- my fund manager friend called to warn me that the market could be down another several thousand points by the end of the next day. Having followed his lead, I had a minuscule short position on in the futures and was thrilled with the huge gains earned by the short. Rather than doing the right thing by setting stops, I decided to go back to sleep and let the trade ride. Upon awakening,

I was shocked to see the trade almost back to even, crushing all of my gains.

The market panicked on the Trump win, but investors quickly realized their collective mistake and bought back into the market aggressively. The Dow has since rallied over 1,000 points to all-time highs. The move has confounded the bears and surprised even the most hard-core bulls.

While the S&P 500 is higher by around 3% since the election, the small-cap Russell 2000 Index has rocketed approximately 12% in the same timeframe.

Greater protectionism and reduced global trade can help smaller firms, specifically those that typically earn less than 20% of their revenue from world trade. The global trade environment will encourage domestic buying, lifting the profits of companies that primarily serve the domestic market.

Smaller companies will also get a boost from Trump's proposed tax policy changes. While large, multinational firms have the resources and geographic footprint to lower taxation, these advantages are simply not available to smaller companies. The proposed 15% corporate tax rate will give small businesses the same tax benefits long enjoyed by the big boys.

Finally, and perhaps most counterintuitively, climbing inflation can help small companies. When prices drop, companies earn smaller profit margins on their goods and services. The opposite happens in an inflationary environment. Firms will be able to increase their prices, earning higher profits and lifting the bottom line.

In other words, helping to level the playing field.

Luckily, these high-potential, small-cap stocks can be had for a reasonable price. I've located 5 such stocks trading for under $6.

Harmonic is a video infrastructure company with a market cap of $390 million. It offers solutions for cable edge and access, as well as video processing, production, and play-out. Harmonic helps its customers to efficiently create, prepare, and deliver differentiated, high-quality video services while simplifying end-to-end asset management, reducing capital and operating expenses, and streamlining workflows.

The company has recently shifted its focus to software services and deferred subscription revenue. Third-quarter sales have climbed 21% year-over-year, but its losses widened from $0.05 to $0.21 over the same time frame. However, its outlook for the fourth quarter is solid, and I expect this company to continue to improve.