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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. Keeping that in mind, here is one Russell 2000 stock that could be a breakout winner and two that may struggle to keep up.
Two Stocks to Sell:
Park-Ohio (PKOH)
Market Cap: $453.5 million
Based in Cleveland, Park-Ohio (NASDAQ: PKOH) provides supply chain management services, capital equipment, and manufactured components.
Why Are We Wary of PKOH?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.2% annually over the last two years
- Performance over the past two years was negatively impacted by new share issuances as its earnings per share dropped by 8.3% annually, worse than its revenue
- Negative free cash flow raises questions about the return timeline for its investments
Park-Ohio is trading at $33.02 per share, or 0.3x trailing 12-month price-to-sales. If you’re considering PKOH for your portfolio, see our FREE research report to learn more.
Moelis (MC)
Market Cap: $4.97 billion
Founded in 2007 by veteran banker Ken Moelis during the lead-up to the financial crisis, Moelis & Company (NYSE: MC) is an independent investment bank that provides strategic and financial advisory services to corporations, financial sponsors, governments, and sovereign wealth funds.
Why Do We Think Twice About MC?
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 3.8% annually
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 3.5% annually over the last five years
Moelis’s stock price of $66.85 implies a valuation ratio of 21.1x forward P/E. Dive into our free research report to see why there are better opportunities than MC.
One Stock to Buy:
Palomar Holdings (PLMR)
Market Cap: $3.00 billion
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Is PLMR a Top Pick?
- Strong 55.8% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Impressive 34% annual book value per share growth over the last two years indicates it’s building equity value this cycle
- Notable projected book value per share growth of 26.2% for the next 12 months hints at strong capital generation
At $113.46 per share, Palomar Holdings trades at 2.5x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
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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.
