The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on. However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.

Picking the right small caps isn’t easy, and that’s exactly why StockStory exists - to help you focus on the best opportunities. That said, here is one Russell 2000 stock that could deliver strong gains and two that may face some trouble.

One Stocks to Sell:

Hillman (HLMN)

Market Cap: $1.82 billion

Established when Max Hillman purchased a franchise operation, Hillman (NASDAQ: HLMN) designs, manufactures, and sells industrial equipment and systems for various sectors.

Why Are We Cautious About HLMN?

1. Muted 1.6% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Operating margin of 3.9% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Hillman’s stock price of $9.23 implies a valuation ratio of 15.8x forward P/E. Check out our free in-depth research report to learn more about why HLMN doesn’t pass our bar.

Palomar Holdings (PLMR)

Market Cap: $3.21 billion

Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.

Why Is PLMR a Top Pick?

1. Strong 38.3% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
2. Impressive 37.7% annual book value per share growth over the last two years indicates it’s building equity value this cycle
3. Notable projected book value per share growth of 24.4% for the next 12 months hints at strong capital generation

Palomar Holdings is trading at $120.05 per share, or 3.4x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

Stocks We Like Even More

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

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