The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. Keeping that in mind, here are two Russell 2000 stocks that could be the next breakout winners and one best left off your watchlist.
One Stock to Sell:
Array (ARRY)
Market Cap: $1.15 billion
Going public in October 2020, Array (NASDAQ: ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.
Why Do We Steer Clear of ARRY?
- Annual sales declines of 5.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $7.45 per share, Array trades at 9.2x forward P/E. Check out our free in-depth research report to learn more about why ARRY doesn’t pass our bar.
Two Stocks to Buy:
JBT Marel (JBTM)
Market Cap: $6.41 billion
Tracing back to its invention of the mechanical milk bottle filler in 1884, JBT Marel (NYSE: JBTM) designs, manufactures, and sells equipment used for food processing and aviation.
Why Will JBTM Beat the Market?
- Annual revenue growth of 52.5% over the past two years was outstanding, reflecting market share gains this cycle
- Healthy unit economics are reflected in its 35.1% gross margin and give it more money to invest in marketing and R&D
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 27.1% annually
JBT Marel is trading at $123.14 per share, or 13.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Bowhead Specialty (BOW)
Market Cap: $901.4 million
Named after the Arctic bowhead whale known for navigating challenging waters, Bowhead Specialty Holdings (NYSE: BOW) is a specialty insurance company that provides customized coverage for complex and high-risk commercial sectors.
Why Is BOW a Top Pick?
- Net premiums earned surged by 33.5% annually over the past two years, reflecting strong market share gains this cycle
- Earnings per share have massively outperformed its peers over the last three years, increasing by 42.9% annually
- Annual book value per share growth of 29.1% over the last two years was superb and indicates its capital strength increased during this cycle
Bowhead Specialty’s stock price of $27.43 implies a valuation ratio of 1.8x forward P/B. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
