Overlooked Small Cap Lights Up LikeFolio

BY ANDY SWAN, FOUNDER, LIKEFOLIO

The tariff-induced panic has subsided. At least, for now.

Retail traders flew back into action this month, helping drive $4 billion into U.S. equities in the first three hours of trading on May 19, 2025 – a new intraday record for retail inflows.

Most major indices have recovered from a volatile start to the year. But so far, investors are voting heavily in favor of large-cap tech giants: Apple (AAPL), Nvidia (NVDA), and Tesla (TSLA). You know the ones.

Meanwhile, the smaller, innovative companies are left overlooked and undervalued.

For forward-thinking investors, this neglect could present a major opportunity.

Consider this:

• Small caps trade at less than 16 times forward earnings, while large caps trade above 22.
• Earnings for small-cap companies are projected to grow 20% next year, outpacing large caps.
• Yet outflows are hitting the highest levels recorded in a decade… driven by short-term fear.

Source: Bank of America

The little guys are struggling now, but that won’t last long.

Hedge funds and institutions are quietly beginning to step back in.

Bank of America (BAC) noted that hedge funds drove the largest weekly equity inflows since August during the week ending May 17, 2025. Their buying was especially aggressive in Industrials, marking the biggest hedge fund inflows to that sector since 2008.

According to Bank of America, institutional buyers recently showed the strongest interest in small-cap industrials since last August.

For this group, the biggest gains usually come after interest rates are lowered, when small companies can borrow more easily and growth picks up. If the Federal Reserve starts cutting rates later this year, the recovery for small-cap stocks could be swift and powerful.

We see this dip as an opportunity that investors like YOU can take advantage of in the long run – with our help.

Let me show you how LikeFolio is targeting the small caps that could lead the way when the rebound kicks in, and one stock that looks ripe for a bounce back.

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This Is Where LikeFolio Excels

Fear has shifted to the small cap sector. And this is where LikeFolio excels.

Our edge comes from real-time consumer behavior instead of hype and headlines. We analyze millions of data points from online purchases, searches, and social media engagements. This method consistently spots trends long before Wall Street catches on.

In April, while analysts were slashing forecasts and investors were panicking, our data suggested a different, calculated approach.

We identified 14 companies poised to thrive despite widespread pessimism.

And our conviction paid off quickly.

Nine of the 14 companies surged double digits or more, logging an average gain of 32% in just over a month. Hims & Hers Health (HIMS) rocketed an astonishing 135%, ThredUp (TDUP) soared 85%, and Five Below (FIVE) gained 68%.

It’s no coincidence that those top performers were the stocks with the smallest market caps: HIMS at $11.7B, TDUP at $852.5M, FIVE at $6.4B.

These “hidden gems” have the potential to rocket higher and faster than their large and mega-cap counterparts – and they’re exactly the kind of companies we focus on in our MegaTrends service.

Their businesses are usually at an earlier stage of growth, making them more agile – with more room for expansion and innovation.

Their shares can trade for just a few bucks apiece, which means they can rocket higher and faster than your average “Blue Chip.”

And best of all: The LikeFolio Data Engine is particularly adept at spotting these kinds of small-cap, big-profit winners.

While the sector’s been in an extended lull, LikeFolio has spotted the outperformers before they went on to rally. HIMS is a perfect example of a small-cap stock that’s defied the narrative and banked TradeSmith Daily readers a hefty profit.

Source: TradingView

Nicholas bought $3,000 worth of HIMS shares following our April 13stock feature and saw his investment gain 45% in 21 days.

And HIMS is just one of dozens of profitable small cap opportunities we’ve identified for our paid-up subscribers.

The tiny autonomous trucking company we recommended at under $3 a share last year? It’s more than doubled…

Source: TradingView

The small-cap nuclear pick we recently issued a profit alert on? It’s rocketed +112% in just one month… making subscribers like Matt E. 102% and John W. an astonishing 130%.

Source: TradingView

Wall Street is ignoring small caps – but these picks prove why you shouldn’t. The sector is in a rut, but it won’t be for long. And LikeFolio is identifying the winners, regardless.

I’ll show you one of the small caps we’re watching that’s “right on the bubble,” as we sports fans like to say.

It’s lagging with the rest of the sector, but from what we’re seeing at LikeFolio, it could be the next to bounce.

A Small-Cap on the Bubble

Devoted TradeSmith Daily readers may actually remember this name from a digest issue a few months back, where Mike Salvatore featured a note I had sent him on an AI play with a unique niche: Innodata (INOD).

Innodata is rapidly becoming a crucial player in the artificial intelligence ecosystem by providing the essential structured data that trains powerful AI systems. It’s still a small player, though, with a market cap of just $1 billion – and plenty of room to run.

This company collaborates directly with major enterprise and Big Tech firms to transform raw, unstructured information into clean, labeled, and enriched datasets. These highly refined datasets ensure AI models are accurate, reliable, and compliant, particularly in critical, regulated industries like health care, legal, and finance.

The explosive growth of AI models, both in size and complexity, is driving unprecedented demand for the sophisticated data processing services Innodata offers.

This places the company at the center of an AI mega trend, providing foundational infrastructure necessary for scaling next-generation AI applications.

We added INOD to the MegaTrends Watchlist way back in May of last year as an AI pick-and-shovel with promise. The stock has gained +211% since.

But its rally came to a screeching halt in 2025… giving traders a potential window of opportunity.

Source: TradingView

Despite INOD’s recent sluggish stock performance, the company is delivering exceptional operational results.

In the first quarter of 2025, Innodata flexed its muscle, reporting impressive revenue growth of 120%. Even more striking was its profitability leap. Adjusted EBITDA surged from $3.8 million to $12.7 million, all while holding a robust cash position of $56.6 million.

Significantly, Innodata’s largest client, already substantial with an annualized run rate of $135 million, grew spending by an additional 5% in just one quarter. While management expects spending from this top client may moderate slightly in the short term, the underlying growth narrative is compelling…

Especially when you consider LikeFolio’s forward-looking demand data, which is currently recording a +58% jump in INOD unique visits on a year-over-year basis:

The takeaway: Innodata is rapidly expanding its customer base, diversifying revenue streams, and firmly establishing itself as an essential “pick-and-shovel” play in the booming AI gold rush.

This company is fundamentally enabling the proliferation of AI.

As enterprises across various sectors increasingly rely on AI for mission-critical applications, its expertise in data structuring and enhancement will become even more indispensable.

We like INOD’s strategic positioning. We love the traction we’re seeing in LikeFolio data. And with the stock lagging, now is the time to pay attention.

The Bottom Line

While Wall Street chases big-name stocks, savvy investors understand the power of overlooked, undervalued small-cap companies.

Names like HIMS, INOD, and the picks we’re targeting in MegaTrends are riding significant industry macro trends and are poised for explosive growth.

I’d love to bring you in on the rest of the opportunities we’re delivering to our MegaTrends subscribers. The AV play that’s more than doubled, the nuclear pick rocketing 112%, and more than a dozen other profitable plays are waiting for you in our portfolio… not to mention the next big opportunities we’re eyeing as I write this.

To learn how you can join, give our team a call at 888-585-6042 and they’ll be more than happy to get you set up.

Remember: The opportunity won’t stay hidden forever.

Now’s the time to act.

Until next time,

Andy Swan
Founder, LikeFolio