Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings. However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.

Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three small-cap stocks to avoid and some other investments you should consider instead.

Kohl's (KSS)

Market Cap: $1.53 billion

Founded as a corner grocery store in Milwaukee, Wisconsin, Kohl’s (NYSE: KSS) is a department store chain that sells clothing, cosmetics, electronics, and home goods.

Why Are We Out on KSS?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Sales are projected to tank by 1.2% over the next 12 months as its demand continues evaporating
3. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability

At $13.67 per share, Kohl's trades at 9.9x forward P/E. Check out our free in-depth research report to learn more about why KSS doesn’t pass our bar.

Albany (AIN)

Market Cap: $1.65 billion

Founded in 1895, Albany (NYSE: AIN) is a global textiles and materials processing company, specializing in machine clothing for paper mills and engineered composite structures for aerospace and other industries.

Why Should You Sell AIN?

1. Annual revenue growth of 1.5% over the last two years was below our standards for the industrials sector
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 10.7 percentage points
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Albany’s stock price of $58.36 implies a valuation ratio of 24x forward P/E. Read our free research report to see why you should think twice about including AIN in your portfolio.

Ridgepost Capital (RPC)

Market Cap: $826.8 million

Operating as a bridge between institutional investors and hard-to-access private market opportunities, Ridgepost Capital (NYSE: RPC) is an alternative asset management firm that provides access to private equity, venture capital, impact investing, and private credit opportunities in the middle and lower middle markets.

Why Does RPC Give Us Pause?

1. Annual earnings per share growth of 5.5% underperformed its revenue over the last two years, showing its incremental sales were less profitable
2. ROE of 4.1% reflects management’s challenges in identifying attractive investment opportunities

Ridgepost Capital is trading at $7.59 per share, or 7.5x forward P/E. To fully understand why you should be careful with RPC, check out our full research report (it’s free).

Stocks We Like 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.