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. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two best left off your watchlist.
Two Stocks to Sell:
Bel Fuse (BELFA)
Market Cap: $2.11 billion
Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.
Why Are We Cautious About BELFA?
- Annual sales declines of 1.5% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have contracted by 6.9% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
Bel Fuse is trading at $151.61 per share, or 24.1x forward P/E. Check out our free in-depth research report to learn more about why BELFA doesn’t pass our bar.
The Pennant Group (PNTG)
Market Cap: $973.8 million
Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ: PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.
Why Does PNTG Fall Short?
- Smaller revenue base of $842.2 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
The Pennant Group’s stock price of $28.16 implies a valuation ratio of 22.5x forward P/E. Dive into our free research report to see why there are better opportunities than PNTG.
One Stock to Buy:
Nicolet Bankshares (NIC)
Market Cap: $1.80 billion
Starting as Green Bay Financial Corporation in 2000 before rebranding in 2002, Nicolet Bankshares (NYSE: NIC) is a regional bank holding company that provides commercial, agricultural, and consumer banking services primarily in Wisconsin, Michigan, and Minnesota.
Why Is NIC a Good Business?
- Market share has increased this cycle as its 18.8% annual net interest income growth over the last five years was exceptional
- Market share is on track to rise over the next 12 months as its 54.4% projected net interest income growth implies demand will accelerate from its five-year trend
- Net interest margin increased by 65 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more capital to invest or return to shareholders
At $121.39 per share, Nicolet Bankshares trades at 1.4x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even 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 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
