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 is one Russell 2000 stock that could be a breakout winner and two that may face some trouble.
Two Stocks to Sell:
LGI Homes (LGIH)
Market Cap: $1.38 billion
Based in Texas, LGI Homes (NASDAQ: LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.
Why Do We Think LGIH Will Underperform?
- Annual sales declines of 10.4% for the past five years show its products and services struggled to connect with the market during this cycle
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
LGI Homes’s stock price of $58.70 implies a valuation ratio of 16.4x forward P/E. Read our free research report to see why you should think twice about including LGIH in your portfolio.
Cohen & Steers (CNS)
Market Cap: $4.34 billion
Founded in 1986 as a pioneer in real estate investment trusts (REITs), Cohen & Steers (NYSE: CNS) is an investment manager specializing in real estate securities, infrastructure, real assets, and preferred securities for institutional and individual investors.
Why Do We Think Twice About CNS?
- Muted 3.2% annual revenue growth over the last five years shows its demand lagged behind its financials peers
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
At $84.51 per share, Cohen & Steers trades at 22.8x forward P/E. If you’re considering CNS for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Palomar Holdings (PLMR)
Market Cap: $3.58 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 Do We Love PLMR?
- Market penetration was impressive this cycle as its net premiums earned expanded by 56.8% annually over the last two years
- Impressive 32.6% annual book value per share growth over the last two years indicates it’s building equity value this cycle
- Book value per share outlook for the upcoming 12 months is outstanding and shows it’s on track to build significant equity value
Palomar Holdings is trading at $136.93 per share, or 3.3x forward P/B. Is now the time to initiate a position? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
