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.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
S&T Bancorp (STBA)
Market Cap: $1.56 billion
Tracing its roots back to 1902 in western Pennsylvania's industrial heartland, S&T Bancorp (NASDAQ: STBA) is a Pennsylvania-based bank holding company that provides retail and commercial banking services, cash management, trust services, and investment advisory solutions.
Why Is STBA Not Exciting?
- Net interest income trends were unexciting over the last five years as its 4.9% annual growth was below the typical banking firm
- Estimated net interest income growth of 3.8% for the next 12 months is soft and implies weaker demand
- Earnings per share were flat over the last two years and fell short of the peer group average
S&T Bancorp is trading at $43.31 per share, or 1.1x forward P/B. Read our free research report to see why you should think twice about including STBA in your portfolio.
Hamilton Insurance Group (HG)
Market Cap: $3.16 billion
Founded in 2013 and operating through three distinct underwriting platforms across four countries, Hamilton Insurance Group (NYSE: HG) operates global specialty insurance and reinsurance platforms across Lloyd's, Ireland, Bermuda, and the United States.
Why Does HG Give Us Pause?
- Sales are projected to remain flat over the next 12 months as demand decelerates from its two-year trend
- Annual earnings per share growth of 14% underperformed its revenue over the last two years, showing its incremental sales were less profitable
Hamilton Insurance Group’s stock price of $31.85 implies a valuation ratio of 1x forward P/B. Check out our free in-depth research report to learn more about why HG doesn’t pass our bar.
One Stock to Buy:
Watts Water Technologies (WTS)
Market Cap: $9.91 billion
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Is WTS a Good Business?
- Market share has increased this cycle as its 10.7% annual revenue growth over the last five years was exceptional
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 21.9% exceeded its revenue gains over the last five years
- Free cash flow margin grew by 6.1 percentage points over the last five years, giving the company more chips to play with
At $296.82 per share, Watts Water Technologies trades at 24.8x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
