Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. 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:
Mercury General (MCY)
Market Cap: $5.57 billion
Founded in 1961 and maintaining a network of over 6,300 independent agents across the country, Mercury General (NYSE: MCY) is an insurance company that primarily sells automobile insurance policies through independent agents in 11 states, with a strong focus on California.
Why Are We Cautious About MCY?
- Estimated sales growth of 1.3% for the next 12 months implies demand will slow from its two-year trend
- Capital trends were unexciting over the last five years as its 4.2% annual book value per share growth was below the typical insurance firm
- Below-average return on equity indicates management struggled to find compelling investment opportunities
Mercury General’s stock price of $100.53 implies a valuation ratio of 1.8x forward P/B. If you’re considering MCY for your portfolio, see our FREE research report to learn more.
Camden National Bank (CAC)
Market Cap: $817.1 million
Rooted in Maine's coastal communities since 1875, Camden National (NASDAQ: CAC) is a regional bank holding company that provides banking, wealth management, and financial services to consumers and businesses throughout Maine and New Hampshire.
Why Are We Wary of CAC?
- Muted 8.6% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Annual earnings per share growth of 1.2% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Flat tangible book value per share over the last five years suggest it must find different ways to enhance shareholder value during this cycle
Camden National Bank is trading at $48.29 per share, or 1.1x forward P/B. Check out our free in-depth research report to learn more about why CAC doesn’t pass our bar.
One Small-Cap Stock to Buy:
Nicolet Bankshares (NIC)
Market Cap: $2.99 billion
Starting as Green Bay Financial Corporation in 2000 before rebranding in 2002, Nicolet Bankshares (NYSE: NIC) is a regional bank holding company that provides commercial, agricultural, and consumer banking services primarily in Wisconsin, Michigan, and Minnesota.
Why Should You Buy NIC?
- Annual net interest income growth of 21.9% over the past five years was outstanding, reflecting market share gains this cycle
- Net interest margin expanded by 65 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
- Annual tangible book value per share growth of 10.2% over the last five years was superb and indicates its capital strength increased during this cycle
At $140.81 per share, Nicolet Bankshares trades at 1.2x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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.
