The Russell 2000 (^RUT) is packed with potential breakout stocks, thanks to its focus on smaller companies with high growth potential. However, smaller size also means these businesses often lack the resilience and financial flexibility of large-cap firms, making careful selection crucial.
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 are two Russell 2000 stocks that could deliver strong gains and one best left off your watchlist.
One Stock to Sell:
Columbus McKinnon (CMCO)
Market Cap: $443.6 million
With 19 different brands across the globe, Columbus McKinnon (NASDAQ: CMCO) offers material handling equipment for the construction, manufacturing, and transportation industries.
Why Should You Dump CMCO?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Sales over the last two years were less profitable as its earnings per share fell by 9.3% annually while its revenue was flat
- Free cash flow margin dropped by 7.4 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Columbus McKinnon’s stock price of $15.62 implies a valuation ratio of 5.8x forward P/E. If you’re considering CMCO for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
City Holding (CHCO)
Market Cap: $1.80 billion
With roots dating back to 1957 and a strategic presence along the I-64 and I-81 corridors, City Holding (NASDAQGS:CHCO) operates as a financial holding company providing banking, trust, and investment services through its subsidiary City National Bank across West Virginia, Kentucky, Virginia, and Ohio.
Why Should CHCO Be on Your Watchlist?
- Differentiated product suite is reflected in its Strong performance of its loan book leads to a High-yielding loan book and low cost of funds lead to a stellar net interest margin of 3.9%
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
At $124.07 per share, City Holding trades at 2.3x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
Fidelis Insurance (FIHL)
Market Cap: $1.84 billion
Founded in Bermuda in 2014 and designed to adapt nimbly to evolving market conditions, Fidelis Insurance (NYSE: FIHL) is a global specialty insurer and reinsurer that provides customized coverage across property, specialty, and bespoke risk solutions.
Why Do We Like FIHL?
- Strong 20.6% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Projected revenue growth of 10.4% for the next 12 months suggests its momentum from the last two years will persist
- Capital generation for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust book value per share growth of 20.7%
Fidelis Insurance is trading at $17.54 per share, or 0.8x forward P/B. 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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