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. Keeping that in mind, here is one Russell 2000 stock that could deliver strong gains and two that may struggle to keep up.
Two Stocks to Sell:
AAR (AIR)
Market Cap: $2.43 billion
The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services
Why Are We Cautious About AIR?
- Muted 3.9% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 0.9% for the last five years
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $68.63 per share, AAR trades at 15.8x forward P/E. Dive into our free research report to see why there are better opportunities than AIR.
Franklin BSP Realty Trust (FBRT)
Market Cap: $889.6 million
Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.
Why Do We Avoid FBRT?
- Annual sales declines of 3.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Tangible book value per share tumbled by 1.9% annually over the last five years, showing banking sector trends are working against its favor during this cycle
Franklin BSP Realty Trust is trading at $10.82 per share, or 0.7x forward P/B. Check out our free in-depth research report to learn more about why FBRT doesn’t pass our bar.
One Stock to Watch:
German American Bancorp (GABC)
Market Cap: $1.40 billion
Founded in 1910 during a wave of community banking expansion in the Midwest, German American Bancorp (NASDAQ: GABC) is a financial holding company that provides banking, wealth management, and insurance services across southern Indiana and Kentucky.
Why Does GABC Stand Out?
- Exciting net interest income outlook for the upcoming 12 months calls for 37.6% growth, an acceleration from its four-year trend
- Capital generation will likely accelerate over the next 12 months as its forecasted tangible book value per share growth of 14.6% is above its two-year trend
- ROE punches in at 12.7%, illustrating management’s expertise in identifying profitable investments
German American Bancorp’s stock price of $37.37 implies a valuation ratio of 1.3x forward P/B. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking 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 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
