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. That said, here are two Russell 2000 stocks that could be the next breakout winners and one that may face some trouble.
One Stock to Sell:
Belden (BDC)
Market Cap: $5.23 billion
With its enamel-coated copper wire used in WWI for the Allied forces, Belden (NYSE:BDC) designs, manufactures, and sells electronic components to various industries.
Why Are We Wary of BDC?
- Annual revenue growth of 4% over the last two years was below our standards for the industrials sector
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 5.1% annually
- Eroding returns on capital suggest its historical profit centers are aging
Belden is trading at $136.94 per share, or 16.9x forward P/E. Read our free research report to see why you should think twice about including BDC in your portfolio.
Two Stocks to Buy:
DXP (DXPE)
Market Cap: $2.63 billion
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ:DXPE) provides pumps, valves, and other industrial components.
Why Do We Love DXPE?
- Annual revenue growth of 14.9% over the last five years was superb and indicates its market share increased during this cycle
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share repurchases over the last five years enabled its annual earnings per share growth of 47.4% to outpace its revenue gains
At $169.61 per share, DXP trades at 27.5x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
WisdomTree (WT)
Market Cap: $2.25 billion
Originally founded as a financial media company before pivoting to ETF management in 2006, WisdomTree (NYSE:WT) is a financial services company that creates and manages exchange-traded funds (ETFs) and other investment products for individual and institutional investors.
Why Are We Bullish on WT?
- Annual revenue growth of 18.9% over the last two years was superb and indicates its market share increased during this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 52.5% to outpace its revenue gains
- Industry-leading 17% return on equity demonstrates management’s skill in finding high-return investments
WisdomTree’s stock price of $16.38 implies a valuation ratio of 15.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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