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 is one Russell 2000 stock that could deliver strong gains and two best left off your watchlist.
Two Stocks to Sell:
United Parks & Resorts (PRKS)
Market Cap: $1.87 billion
Parent company of SeaWorld and home of the world-famous Shamu, United Parks & Resorts (NYSE: PRKS) is a theme park chain featuring marine life, live entertainment, roller coasters, and waterparks.
Why Are We Out on PRKS?
- Sluggish trends in its visitors suggest customers aren’t adopting its solutions as quickly as the company hoped
- Poor free cash flow margin of 12.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $39.62 per share, United Parks & Resorts trades at 8.1x forward P/E. Read our free research report to see why you should think twice about including PRKS in your portfolio.
Baldwin Insurance Group (BWIN)
Market Cap: $1.89 billion
Rebranded from BRP Group in May 2024, Baldwin Insurance Group (NASDAQ: BWIN) is an independent insurance distribution company that provides tailored insurance, risk management, and employee benefits solutions to businesses and individuals.
Why Does BWIN Fall Short?
- Investments to defend its competitive moat have ramped up over the last five years as its free cash flow margin decreased by 5.1 percentage points
- 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Baldwin Insurance Group is trading at $19.43 per share, or 8.7x forward P/E. Check out our free in-depth research report to learn more about why BWIN doesn’t pass our bar.
One Stock to Buy:
CSW (CSW)
Market Cap: $4.72 billion
With over two centuries of combined operations manufacturing and supplying, CSW (NYSE: CSW) offers special chemicals, coatings, sealants, and lubricants for various industries.
Why Should You Buy CSW?
- Annual revenue growth of 16.9% over the past two years was outstanding, reflecting market share gains this cycle
- Healthy operating margin of 18% shows it’s a well-run company with efficient processes
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 23.4% annually
CSW’s stock price of $279.53 implies a valuation ratio of 23.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
