So instead of chasing the hype, Canadian investors should focus on small companies with sound fundamentals, a proven business model that scales, and strong leadership teams. These factors do not eliminate risk, but they can increase the chances of long-term returns.
With that context in mind, here are two top small-cap TSX stocks to buy now for 2026.
Top Small Cap Stocks #1: Hammond Power Solutions
Hammond power solutions (TSX:HPS.A) is an attractive small cap stock to buy now for 2026. The company specializes in dry transformers, power quality solutions and other magnetic products. These products are witnessing solid demand amid an ongoing push for electrification.
While Hammond Power shares have already delivered notable gains, the company’s underlying business momentum suggests there is still significant upside potential. Demand is driven by robust activity in fast-growing sectors such as renewable energy, critical infrastructure projects and energy distribution. This strength is reflected in Hammond’s order book, which is still large. By the end of the third quarter of 2025, the company reported a backlog that was 22.4% higher than the same period a year earlier, underscoring strong visibility into future revenue.
Management commentary from the most recent quarter reflects a positive trend. Demand for data centers accelerated significantly, with the company securing substantial orders shortly after the end of the quarter. These new orders are expected to ship primarily in 2026.
Looking ahead, Hammond Power Solutions appears well positioned to benefit from the long-term electrification trends that are reshaping global energy and data infrastructure. In addition to organic growth, management continues to evaluate acquisition opportunities that could further increase scale and market reach.
Additionally, the company’s ongoing manufacturing initiatives and capital expansion efforts position the company well for sustainable growth, driven by rising electricity consumption and demand for digital infrastructure.
Top Small-Cap Stocks No. 2: 5N Plus
5N Plus (TSX:VNP) is an attractive small-cap stock to buy now for 2026 given its exposure to several high-growth industries. The company focuses on advanced semiconductors and performance materials with applications in the renewable energy infrastructure, space satellites, medical imaging, pharmaceutical and industrial markets. As these end markets continue to grow, demand for 5N Plus’ highly specialized products is likely to grow, supporting the financial sector.
This favorable demand backdrop has already translated into significant gains for the stock, and the outlook points to further upside potential in 2026. Growth is primarily driven by momentum in the Specialty Semiconductors segment, where demand from terrestrial renewable energy projects and space-based solar remains robust. A recently expanded supply agreement with a key strategic customer is expected to significantly increase volumes, with shipments expected to increase in the coming years. At the same time, the company is likely to benefit from a strong pipeline of space projects.
In addition, China’s leading position in high-purity materials outside China is becoming increasingly important as global customers seek secure, diversified and geopolitically resilient supply chains. This advantage strengthens the competitive position.
Overall, 5N Plus is an attractive small-cap stock to buy and hold for the long term.
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