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.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. 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:
THOR Industries (THO)
Market Cap: $4.06 billion
Created through the acquisition and merger of various RV manufacturers, THOR Industries manufactures and sells a range of recreational vehicles, including motorhomes and travel trailers, catering to consumers seeking the freedom and comfort of the RV lifestyle.
Why Do We Avoid THO?
- Sales tumbled by 2.3% annually over the last five years, showing market trends are working against it during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 12.8% annually, worse than its revenue declines
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
THOR Industries’s stock price of $77.52 implies a valuation ratio of 19.8x forward P/E. Check out our free in-depth research report to learn more about why THO doesn’t pass our bar.
PennyMac Mortgage Investment Trust (PMT)
Market Cap: $845 million
Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE: PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.
Why Do We Steer Clear of PMT?
- Annual sales declines of 14.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Projected net interest income decline of 85.9% for the next 12 months points to a tough demand environment ahead
- Earnings per share have contracted by 12.1% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
PennyMac Mortgage Investment Trust trades at a stock price of $9.67. To fully understand why you should be careful with PMT, check out our full research report (it’s free).
One Small-Cap Stock to Watch:
HighPeak Energy (HPK)
Market Cap: $837.8 million
Operating in the oil-rich northeastern corner of the Midland Basin where Howard and Borden counties meet, HighPeak Energy (NASDAQ: HPK) explores for, develops, and produces crude oil, natural gas liquids, and natural gas.
Why Do We Like HPK?
- Annual revenue growth of 78.2% over the last five years was superb and indicates its market share increased during this cycle
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 78.8%
- EBITDA margin improvement of 7 percentage points over the last five years demonstrates its ability to scale efficiently
HighPeak Energy is trading at $6.67 per share, or 3.4x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
