Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here are three Russell 2000 stocks that don’t make the cut and some better choices instead.
Root (ROOT)
Market Cap: $990.1 million
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Why Are We Cautious About ROOT?
- Policy losses and capital returns have eroded its book value per share this cycle as its book value per share declined by 158% annually over the last five years
- Negative return on equity shows management lost money while trying to expand the business
Root’s stock price of $64.28 implies a valuation ratio of 3.1x forward P/B. Read our free research report to see why you should think twice about including ROOT in your portfolio.
WaFd Bank (WAFD)
Market Cap: $2.53 billion
Founded in 1917 and rebranded from Washington Federal in 2023, WaFd (NASDAQ: WAFD) is a bank holding company that provides lending, deposit services, and insurance through its Washington Federal Bank subsidiary across eight western states.
Why Should You Sell WAFD?
- 6.9% annual net interest income growth over the last five years was slower than its banking peers
- Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 48.8 basis points (100 basis points = 1 percentage point)
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 8.9% annually
At $33.07 per share, WaFd Bank trades at 0.9x forward P/B. If you’re considering WAFD for your portfolio, see our FREE research report to learn more.
LendingTree (TREE)
Market Cap: $734.9 million
Using the same comparison model that revolutionized travel booking, LendingTree (NASDAQ: TREE) operates an online platform that connects consumers with financial service providers across mortgages, personal loans, credit cards, insurance, and other financial products.
Why Is TREE Risky?
- Sales stagnated over the last three years and signal the need for new growth strategies
- Projected sales growth of 8.5% for the next 12 months suggests sluggish demand
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
LendingTree is trading at $54.00 per share, or 8.1x forward EV/EBITDA. Check out our free in-depth research report to learn more about why TREE doesn’t pass our bar.
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
