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.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to swipe left on and some alternatives you should look into instead.
PENN Entertainment (PENN)
Market Cap: $2.33 billion
Established in 1982, PENN Entertainment (NASDAQ: PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.
Why Are We Out on PENN?
- Annual revenue growth of 1.4% over the last two years was below our standards for the consumer discretionary sector
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
PENN Entertainment is trading at $16.48 per share, or 20.8x forward P/E. If you’re considering PENN for your portfolio, see our FREE research report to learn more.
Assured Guaranty (AGO)
Market Cap: $3.90 billion
Serving as a financial safety net for over $11 trillion in debt service payments since its founding in 2003, Assured Guaranty (NYSE: AGO) provides credit protection products that guarantee scheduled payments on municipal bonds, infrastructure projects, and structured finance obligations.
Why Should You Sell AGO?
- Insurance offerings face significant market challenges this cycle as net premiums earned contracted by 4.3% annually over the last five years
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- ROE of 7.7% reflects management’s challenges in identifying attractive investment opportunities
At $81.87 per share, Assured Guaranty trades at 0.7x forward P/B. Check out our free in-depth research report to learn more about why AGO doesn’t pass our bar.
Texas Capital Bank (TCBI)
Market Cap: $3.75 billion
Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ: TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.
Why Does TCBI Fall Short?
- 3.3% annual net interest income growth over the last five years was slower than its banking peers
- Estimated net interest income growth of 6% for the next 12 months is soft and implies weaker demand
- Weak unit economics are reflected in its net interest margin of 3.2%, one of the worst among bank companies
Texas Capital Bank’s stock price of $81.99 implies a valuation ratio of 1.1x forward P/B. To fully understand why you should be careful with TCBI, check out our full research report (it’s free for active Edge members).
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 Exlservice (+354% 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
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