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.

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 are three small-cap stocks to swipe left on and some alternatives you should look into instead.

Sirius XM (SIRI)

Market Cap: $8.21 billion

Known for its commercial-free music channels, Sirius XM (NASDAQ: SIRI) is a broadcasting company that provides satellite radio and online radio services across North America.

Why Do We Steer Clear of SIRI?

1. Number of core subscribers has disappointed over the past two years, indicating weak demand for its offerings
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 43.5% annually
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $24.33 per share, Sirius XM trades at 8.1x forward P/E. Check out our free in-depth research report to learn more about why SIRI doesn’t pass our bar.

La-Z-Boy (LZB)

Market Cap: $1.62 billion

The prized possession of every mancave, La-Z-Boy (NYSE: LZB) is a furniture company specializing in recliners, sofas, and seats.

Why Are We Out on LZB?

1. Sales tumbled by 5.3% annually over the last two years, showing consumer trends are working against its favor
2. Anticipated sales growth of 2.1% for the next year implies demand will be shaky
3. Waning returns on capital imply its previous profit engines are losing steam

La-Z-Boy is trading at $39.58 per share, or 12x forward P/E. Read our free research report to see why you should think twice about including LZB in your portfolio.

Selective Insurance Group (SIGI)

Market Cap: $5.25 billion

Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ: SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.

Why Are We Hesitant About SIGI?

1. Expenses have increased as a percentage of revenue over the last two years as its combined ratio degraded by 7.9 percentage points
2. Incremental sales over the last two years were much less profitable as its earnings per share fell by 14.7% annually while its revenue grew
3. ROE of 11.2% reflects management’s challenges in identifying attractive investment opportunities

Selective Insurance Group’s stock price of $86.33 implies a valuation ratio of 1.6x forward P/B. Dive into our free research report to see why there are better opportunities than SIGI.

High-Quality Stocks for All Market Conditions

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 Strong Momentum Stocks for this week. 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-micro-cap company Tecnoglass (+1,754% 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