Many small-cap stocks have limited Wall Street coverage, giving savvy investors the chance to act before everyone else catches on. But the flip side is that these businesses have increased downside risk because they lack the scale and staying power of their larger competitors.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here is one small-cap stock that could amplify your portfolio’s returns and two best left ignored.
Two Small-Cap Stocks to Sell:
Brunswick (BC)
Market Cap: $3.70 billion
Formerly known as Brunswick-Balke-Collender Company, Brunswick (NYSE: BC) is a designer and manufacturer of recreational marine products, including boats, engines, and marine parts.
Why Are We Out on BC?
- Products and services aren't resonating with the market as its revenue declined by 13.8% annually over the last two years
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.8 percentage points over the next year
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $56.27 per share, Brunswick trades at 12.9x forward P/E. To fully understand why you should be careful with BC, check out our full research report (it’s free).
Arbor Realty Trust (ABR)
Market Cap: $2.01 billion
With roots dating back to 2003 and a focus on the stability of multifamily housing, Arbor Realty Trust (NYSE: ABR) is a specialized lender that provides financing solutions for multifamily and commercial real estate while also originating and servicing government-backed mortgage loans.
Why Should You Dump ABR?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.8% annually over the last two years
- Sales were less profitable over the last two years as its earnings per share fell by 17.6% annually, worse than its revenue declines
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 2.3% annually over the last two years
Arbor Realty Trust’s stock price of $10.30 implies a valuation ratio of 0.9x forward P/B. If you’re considering ABR for your portfolio, see our FREE research report to learn more.
One Small-Cap Stock to Watch:
LegalZoom (LZ)
Market Cap: $1.57 billion
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Does LZ Stand Out?
- Subscription Units have increased by an average of 10.5% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Share repurchases over the last three years enabled its annual earnings per share growth of 289% to outpace its revenue gains
- Free cash flow margin grew by 13.1 percentage points over the last few years, giving the company more chips to play with
LegalZoom is trading at $8.70 per share, or 9.1x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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
