Small-cap stocks in the Russell 2000 (^RUT) can be a goldmine for investors looking beyond the usual large-cap names. But with less stability and fewer resources than their bigger counterparts, these companies face steeper challenges in scaling their businesses.
The high-risk, high-reward nature of the Russell 2000 makes stock selection critical, and we’re here to guide you toward the right ones. That said, here are two Russell 2000 stocks that could deliver strong gains and one that may struggle to keep up.
One Stock to Sell:
Live Oak Bancshares (LOB)
Market Cap: $1.68 billion
Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE: LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.
Why Is LOB Not Exciting?
- Net interest margin of 3.3% reflects its high servicing and capital costs
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 8.6% annually
At $36.38 per share, Live Oak Bancshares trades at 1.3x forward P/B. Dive into our free research report to see why there are better opportunities than LOB.
Two Stocks to Watch:
CNX Resources (CNX)
Market Cap: $4.66 billion
Tracing back to operations that began in 1860, CNX Resources (NYSE: CNX) drills for and produces natural gas from underground shale formations in Pennsylvania, Ohio, and West Virginia.
Why Are We Fans of CNX?
- Attractive asset base leads to wonderful unit economics and a stellar gross margin of 68%
- Static EBITDA margin over the last five years shows it couldn’t become more efficient
- CNX is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
CNX Resources’s stock price of $31.53 implies a valuation ratio of 9.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Cactus (WHD)
Market Cap: $4.34 billion
Named for the spiky wellhead equipment that reminded founders of desert cacti, Cactus (NYSE: WHD) manufactures wellheads, valves, and spoolable pipes used in drilling and producing oil and gas wells.
Why Does WHD Stand Out?
- Impressive 28.5% annual revenue growth over the last ten years indicates it’s winning market share this cycle
- EBITDA margin was unchanged over the last five years, suggesting it failed to gain leverage on its fixed costs
- Robust free cash flow margin of 21.7% gives it many options for capital deployment
Cactus is trading at $62.20 per share, or 19.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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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-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
