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 deliver strong gains and two best left off your watchlist.
Two Stocks to Sell:
Malibu Boats (MBUU)
Market Cap: $446.3 million
Founded in California in 1982, Malibu Boats (NASDAQ:MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.
Why Are We Bearish on MBUU?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last five years
- Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Malibu Boats is trading at $22.70 per share, or 8.7x forward P/E. Dive into our free research report to see why there are better opportunities than MBUU.
Heartland Express (HTLD)
Market Cap: $860.7 million
Founded by the son of a trucker, Heartland Express (NASDAQ:HTLD) offers full-truckload deliveries across the United States and Mexico.
Why Are We Out on HTLD?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 18.8% annually over the last two years
- Free cash flow margin dropped by 14.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $11.12 per share, Heartland Express trades at 53.7x forward P/E. If you’re considering HTLD for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Alignment Healthcare (ALHC)
Market Cap: $1.69 billion
Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ:ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.
Why Are We Bullish on ALHC?
- Annual revenue growth of 43.2% over the past two years was outstanding, reflecting market share gains this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 47.9% over the last five years outstripped its revenue performance
- Free cash flow margin jumped by 6.8 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Alignment Healthcare’s stock price of $8.03 implies a valuation ratio of 14.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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.