Things are looking up for small cap stocks – the stock market’s Davids. The election of Donald Trump is projected to have wide-ranging implications on American businesses. Trump’s most impactful policies are expecpted to play out on trade policy, coporate taxes and regulation.
Why small cap stocks stand to benefit
Although in the end it comes to down to fundamental analysis to pick the winners, small cap stocks look like the big beneficiaries in a second Trump term. Some initial gains have already been made. The Vanguard S&P Small Cap 600 Value ETF 📈 rose 5.7% in the immediate aftermath of the election. The Ziggma Small Cap Model Portfolio 💼 is up by 54% over the past year. But a closer look at the various policies that stand to favor small, domestically focused companies suggests that there are more gains in store.
Top 5 small cap stocks for a second Trump term
While a rising tide tends to lift all boats, or at least most, there are always big winners and losers. Picking the winners in a segment favored by the market for a prolonged period of time can pay handsomely for investors.
Leveraging our proprietary fundamental stock research engine, we identified five small stocks with great fundamentals and the potential to benefit disproportionately from a rally in small stocks. Here is our shortlist.
3. Phibro Animal Health Corp: PAHC 📈
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Why small-cap stocks are poised for outsized gains
1. Deregulation
Donald Trump’s “efficiency” czars Elon Musk and Vivek Ramaswamy will head a new advisory body called the Department of Government Efficiency (DOGE). The newly founded DOGE will issue recommendations on how to make the US administration run more efficiently. Things could move very fast. DOGE has already started work on a list of thousands of regulations which Trump could invalidate unilaterally.
The biggest beneficiaries of less regulation are small businesses. These generally don’t have the capacity to ensure compliane with company resources. Instead, many small companies have to resort to use specialized service providers. Removing this cost burden would act as a strong boost to small business’ bottomline.
2. Protectionist policies
Protectionist policies under Donald Trump, such as tariffs and trade restrictions, are designed to prioritize domestic industries and reduce reliance on foreign imports. Small-cap stocks, which typically derive most of their revenue from within the United States, are less exposed to global trade tensions and stand to benefit from a focus on local markets. Additionally, these companies are often nimble and better positioned to adapt to shifts in domestic demand, thus gaining a competitive edge over multinational firms. With reduced competition from foreign imports and a favorable policy environment, small-cap stocks are well-suited to thrive in a protectionist landscape. Finally, tariffs might encourage investment into U.S.-based production, allowing these companies to scale up and capture market share within the protected U.S. market.
3. Low taxes
Donald Trump’s policies on corporate tax rates aim to extend the tax cuts previously implemented during his administration, with the potential for further reductions. Companies with domestic production can even hope for a tax rate as low as 15%, a significant reduction from the current level of 21%.
Lower taxes are expected to stimulate economic growth by increasing net income for companies, allowing them to reinvest in expansion and innovation. Small-cap companies, which often operate with tighter resources compared to large-cap firms, stand to benefit disproportionately from these tax advantages. The additional retained earnings can serve as a catalyst for growth, driving their ability to compete, innovate, and scale more effectively.
Lower tax rate will also boost share buybacks. Following the implementation of the Tax Cuts and Jobs Act (TCJA) of 2017, which lowered America’s federal corporate-tax rate from 35% to 21%, share buybacks by S&P 500 firms leaped from $540bn in 2017 to $840bn in 2018.
4. Cheap energy
Donald Trump’s energy policy is firmly rooted in expanding domestic fossil fuel production, with a “drill, baby, drill” approach. Some analysts even speculate that tax incentives for renewable energy introduced in the Inflation Reduction Act could be redirected to support the oil and gas industry. For businesses, increased drilling could lead to lower oil prices, creating a ripple effect of reduced energy costs. Small-cap companies, in particular, stand to benefit disproportionately, as their smaller-scale operations make them more sensitive to cost savings than their large-cap counterparts.
Here are our five best small cap stocks for a Trump term
1. Iradimed Corp (IRMD) 📈
$IRMD
| 2025 Price/Earnings | 29x |
| 2025 Revenue Growth | 11% |
| 2025 Earnings Growth | 5% |
Iradimed Corporation was established in 1992 and is headquartered in Winter Springs, Florida. The company specializes in developing, manufacturing, marketing, and distributing magnetic resonance imaging (MRI) compatible medical devices. Clients include hospitals, acute care facilities, and outpatient imaging centers.
Secular growth story
The industry in which IRMD operates in shows dynamic growth with a projected growth rate of 9%. IRMD outpaces the industry average with revenue growth of over 22% in 2023.
The medical equipment industry is a secular growth story. It is projected to experience a Compound Annual Growth Rate (CAGR) of approximately 7% from 2024 to 2029, with market size estimates reaching USD 893 billion by 2029.
2. Liquidity Services (LQDT) 📈
$LQDT
| 2025 Price/Earnings | 21x |
| 2025 Revenue Growth | 7% |
| 2025 Earnings Growth | 21% |
Liquidity Services was established in 1999. The company is headquartered in Bethesda, Maryland, from where it operates a global network of e-commerce marketplaces specializing in surplus asset management. The company connects buyers and sellers through platforms such as Liquidation.com, GovDeals, and Machinio, facilitating the efficient sale of surplus and salvage assets across various industries, including government, energy, and retail. By leveraging technology and comprehensive services, Liquidity Services enables clients to maximize the value recovery of surplus assets.
Top of class in Business Services
LQDT has some of the best growth prospects in the business services industry. Revenue is projected to grow by 11% and 7% respectively in 2024 and 2025. Meanwhile net profit is projected to grow even faster at a rate of 52% and 21% in 2024 and 2025.
The drop in net profit experienced in 2023 was due to a one off non-cash item. In fiscal year 2022, LQDT had recognized an $11.5 million non-cash gain related to a prior acquisition. In contrast, fiscal year 2023 did not include a similar benefit, leading to a lower net profit despite operational improvements.
Operationally, LQDT showed strong growth, with increases in Gross Merchandise Volume (GMV) and revenue across several segments. For instance, in the fourth quarter of fiscal year 2023, the company reported an 11% increase in GMV and a 6% rise in revenue compared to the same period in the previous year.
3. Phibro Animal Health (PAHC) 📈
Phibro Animal Health was established in 1946. The firm, which is headquartered in Teaneck, NY, is a global leader in animal health and mineral nutrition. Operating in over 80 countries, the company develops, manufactures, and markets a diverse range of products, including antibacterials, anticoccidials, anthelmintics, nutritional specialties, and vaccines, serving various species such as poultry, swine, cattle, and aquaculture.
Zoetis acquisition to drive growth and profitability
Over the period 2020 to 2024, PAHC already experienced attractive organic growth rates. In Q2 2024, PAHC acquired Zoetis Inc.’s medicated feed additive (MFA) product portfolio and certain water-soluble products for $350 million to accelerate earnings growth through synergies.
The acquired portfolio, which generated around $400 million in revenue in 2023, is expected to enhance Phibro’s profitability and EBITDA margin, contributing positively to PAHC’s earnings per share.
4. Cavco Industries (CVCO) 📈
Cavco Industries is a leading designer and manufacturer of factory-built housing, including manufactured homes, modular homes, and park model RVs. Headquartered in Phoenix, Arizona, the company operates manufacturing facilities across the United States and distributes its products through a wide network of independent retailers and company-owned retail locations..
Accelerating earnings beating estimates
Cavco Industries is a well-run homebuilder benefitting from growing demand for affordable housing solutions. The company’s earnings growth is projected to accelerated with a jump in eps by 18% in 2026.
In the fiscal quarter ending September 30, 2024, Cavco had surpassed consensus estimates of $4.70 by reporting an EPS of $5.28. Additionally, the company reported quarterly revenue of $507.46 million, exceeding analysts’ expectations of $480.10 million.
This stellar performance was driven by continued strong demand for manufactured housing. The company’s strategic initiatives to expand its product offerings and geographic reach make for an additional growth catalyst.
The company has also demonstrated a commitment to improving operational efficiencies and managing costs effectively. As a result, CVCO’s cashflow margin reached an all-time high in the most recent financial year.
5. Tecnoglass, Inc (TGLS) 📈
Tecnoglass was founded in 1984. The company, which is headquartered in Miami, Florida, is a leading manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries. It serves a diverse clientele across the United States, Colombia, Panama, and other international markets with a one-stop solution for architectural glass needs.
Earnings growth at a reasonable price
TGLS’s stock is very reasonably priced, when adjusting for growth. At 0.7x, its PEG ratio is below 1. Revenue and earnings are expected to grow at 11% of 18% respectively in 2025.
Best-in-class profitability
In the building materials industry, Tecnoglass is well ahead of his peers when it comes to profitability. In 2023, the company’s return on assets reached 22% putting it firmly ahead of industry peers, such as Masco, Owens or James Hardie.
Small-cap stocks to shine bright under Trump
Building on a strong foundation, small-cap stocks are poised to be significant winners in the upcoming Trump presidency. These companies stand to gain from lower corporate tax rates, reduced energy costs, and their relative insulation from global trade conflicts. Moreover, in a world filled with uncertainty, U.S. domestic small-cap stocks could attract a safety premium as investors prioritize predictable, homegrown opportunities over more globally exposed competitors. In financial markets, stability and certainty are valuable commodities, and small caps are well-positioned to deliver both.
Disclosure
To avoid any risk of being accused of conflict of interest, Ziggma team members presently hold no shares in the stocks mentioned in this article.
Important Notice
This article is not investment advice. We cannot predict whether these stocks will go up or down.
We believe the information contained in this text to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions available data and are subject to change without notice. Please consider your full financial situation prior to making an investment decision.