My Top Small-Cap Stock Pick for 2024 Is a Biotech With a Big Opportunity

It is that time of year when market strategists and pundits roll out their predictions and stock picks for the year ahead.

I understand the appeal of these selections, although, personally, I'm not a big fan of this endeavor as I have little confidence in predictions in general and also because picking a stock for the full year implies that it isn't necessary to manage the trade. You should never just pick a stock and hope that it works out. There must be a plan to manage risk and cut losses should it not perform as hoped.

The good news is that picking a stock for the year ahead does offer good ideas to track and trade. They may not work as long-term investments, but they will very likely offer some good short-term trading action.

There are two approaches to the annual stock-picking game. The first is to try to pick a stock that will have the largest return in the year ahead. If you are playing it this way, then you want to pick a low-priced, high-risk stock that will double or triple or more if you are correct.

The second approach is to find a large-cap name that has lower risk but still has the potential for a sizable gain if it performs well. It won't produce a return larger than a hot, high-risk, small-cap name, but it won't totally blow up either.

I'm going make picks using both approaches, starting today with my small-cap pick.

My low-priced, high-risk, small-cap play for 2024 is a name I've written about often in the past: Xeris Biopharma Holdings  XERS .

Xeris has been a disappointment in recent years due to execution issues and a poor biotechnology market, but it has made very steady progress and now looks ready to finally fulfill its promise.

The good news about Xeris is that it is a mature company that has solid revenue and is turning cash flow positive. This is not a biotechnology name with no revenue waiting on FDA approval. The financial situation and commercial progress limits downside risk, but there is also potential for major developments that could send the shares sharply higher.

Xeris has three drugs that it is already selling, but its main value is its drug delivery system. It has 174 patents worldwide and 109 patent applications, mostly related to creating a stable form of a drug that can be easily injected.

The company is currently selling Gvoke HypoPen, a ready-to-use rescue pen for severe hypoglycemia. Sales have been growing rapidly. It also sells Recorlev, which treats Cushing's Syndrome, and Keveyis for primary periodic paralysis. Just on the basis of the sales of these three drugs, the company is turning cash flow positive and is a very good value, in my view.

Xeris is also working in-house on developing levothyroxine for the treatment of hypothyroidism. This is a very large market, and the company should be making progress in 2024.

The big opportunity for Xeris is in a joint venture with a large pharmaceutical company that may use its drug delivery system. This may be done to extend patent life or to produce a more convenient way to deliver the drug. Xeris is currently working with Horizon Therapeutics, which was recently acquired by Amgen AMGN , and with Regeneron REGN . It is a complicated process, but management has significant optimism about potential licensing deals. Any deal would likely send the stock sharply higher.

The latest investor presentation for Xeris can be found here.

XERS has been a disappointing stock for a long time, but it looks to be in position to finally capitalize on its great potential.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider XERS to be small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

At the time of publication, Rev Shark was long XERS.