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. That said, here is one small-cap stock that could amplify your portfolio’s returns and two best left ignored.

Two Small-Cap Stocks to Sell:

Boot Barn (BOOT)

Market Cap: $4.79 billion

With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE: BOOT) is a western-inspired apparel and footwear retailer.

Why Are We Wary of BOOT?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Subscale operations are evident in its revenue base of $1.91 billion, meaning it has fewer distribution channels than its larger rivals
3. 7.1 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position

Boot Barn is trading at $161 per share, or 25.9x forward P/E. To fully understand why you should be careful with BOOT, check out our full research report (it’s free).

LGI Homes (LGIH)

Market Cap: $1.36 billion

Based in Texas, LGI Homes (NASDAQ: LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.

Why Should You Dump LGIH?

1. Backlog growth averaged a weak 4.9% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
2. Waning returns on capital imply its previous profit engines are losing steam
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

LGI Homes’s stock price of $56.25 implies a valuation ratio of 7.3x forward P/E. If you’re considering LGIH for your portfolio, see our FREE research report to learn more.

One Small-Cap Stock to Watch:

Ollie's (OLLI)

Market Cap: $7.30 billion

Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.

Why Is OLLI on Our Radar?

1. Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
2. Locations open for at least a year are seeing increased demand as same-store sales have averaged 4.3% growth over the past two years
3. Market share is on track to rise over the next 12 months as its 13.5% projected revenue growth implies demand will accelerate from its five-year trend

At $120.76 per share, Ollie's trades at 31.8x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.